European Morning View - Metals sag on broad risk reduction

Thin holiday trade confined the precious metals to a day of range trade Thursday with gold posting a $7 range and silver 25-cents. The sentiment was echoed across the broader financial markets although risk sentiment appeared positive following the gains Wednesday; the STOXX 50 Index gained 0.25% and FTSE 100 0.75% following a surge in CBI Realized Sales. Despite ongoing Eurozone jitters, as Belgium joined the debt-watch list, the single currency closed only fractionally lower against the dollar and unchanged versus the yen.

Eurozone debt concerns have led risk appetite lower overnight with the euro sliding to a fresh two-month low of 1.3252 against the greenback; EUR/JPY is currently down 0.3% while the dollar has seen broad gains against its major counterparts with the DXY up 0.3%. Equities has also been under pressure overnight amid ongoing EU, Korea and China tightening concerns; the MSCI Asia Pacific Index is off 1.4% and Nikkei 0.4% after Core CPI for Tokyo declined more than expected.

Economic data today includes German CPI, French Consumer Spending and EU Money Supply; none is scheduled from the US.

Bullion prices have been under pressure overnight has a result of the decline in risk sentiment; however, the more industrial metals have posted larger declines with palladium currently down 2.5%, silver 1.3% and platinum 1% compared with gold's 0.4%. Extended Thanksgiving holidays will likely keep trade thin and the complex remains vulnerable to further pressure as traders look to lock in profits and maintain cash positions to cover margin requirements, but we expect gold, and to a lesser extent silver, to remain underpinned by investment bargain hunting as investors look to diversify against the volatile macro-economic and geo-political background.

source