Precious Metals Fundamentals: February 1, 2012

With the start of the session today, we can see the metal is fluctuating around the opening level after the gains recorded yesterday, where the metal is volatile due to the heavy load of major fundamentals awaited today from the euro-area region and the world's largest economy in addition to the Portugal and Germany's bond sale at the time eyes are still focused on the Greek debt-talks.

Gold started the session today at $1737.60 per ounce, and then declined 0.07% or $1.15 per ounce to currently trade around $1736.45 per ounce. The metal set a high of $1470.80 and a low of $1728.58 per ounce.

Today positivity was added to the market after the upbeat performance of the Chinese manufacturing sector, where all eyes track the strength of the Chinese economy which leads the recovery along with the United States. The PMI manufacturing for January showed that the performance of the Chinese manufacturing sector expanded unexpectedly to 50.5 from 50.3, beating median estimate of 49.6.

The sentiment however is still mixed as we can see markets are still tracking the heavy load of fundamentals to be released from Europe and U.S., with the main focus still on the manufacturing performance across the globe and the ADP employment report from the U.S. later during today's session.

In Europe, Switzerland, Germany, the United Kingdom and the euro-area will provide markets with the performance of the manufacturing sector; however, the effect of the German and the euro zone indexes will not be sharp as the readings are expected unrevised; however, the Swiss and British indexes will be more important with projections both sectors could have expanded in the month of January.

Moreover, the euro zone will provide the consumer price index annual flash estimate for January with expectations inflation could have lingered at 2.7% in the euro are region; however, further drop in inflation could ease some demand for the shiny metal, which is held by investors as a hedge against inflation as they seek to protect their wealth from changes in prices.

Furthermore, Germany will auction 5-billion euros of 10-year bonds today, but eyes this time will be on the bond sale as investors will track the benchmark yields on the 10-year long-term bonds.

We expect gold to move in line with the sentiment during the European session, where better than expected data could support the metal to rebound to the upside; however, a downbeat or mixed data could add more volatility and fluctuations to the metal's movement.

After our busy London session overlaps with the New York session, the focus will be on the U.S. important data, where all markets will pay attention for the ADP employment change with expectations the private sector could have added 182 thousand new jobs to the economy, supporting the labor market further after the last addition of 325 thousand seen in December.

The importance of the ADP employment change is that this index could give us some indications on what the U.S. jobs report could bring this month, and this is the reason behind being closely watched. However, strong figure could add more positivity to the market and to the metals in general, but on the other hand less than expected addition could force some pressures on the markets.

Finally, the flow of heavy fundamentals will end after the world's largest economy releases the last major data for today, the ISM-Manufacturing index, where markets will concentrate on the performance of the manufacturing sector in the U.S. for more details on how strong is the U.S. economy and how long this economy will stand still against the debt crisis in Europe, and finally markets will wonder whether the pace of recovery is meant to last or not?

Among other precious metals, silver gained 0.52% or $0.17 per ounce after the opening of $33.18 per ounce to trade in the moment around $33.35 per ounce, after recording the highest at $33.36 and the lowest at $33.09 per ounce.

Platinum advanced 0.39% or $6.25 per ounce to trade now around $1595.00 per ounce after starting the session at $1588.75 per ounce. The metal reached a high of $1601.00 and a low of $1586.75 per ounce.

Palladium added $3.75 or 0.55% to $689.00 per ounce after recording a high of $689.00 and a low of $684.00, noting that the metal started the day at $685.25 per ounce.