Stimulus package expectations excite metals

Industrial metals such as copper, silver and platinum are starting to pickup to a certain extent on an anticipation that there will be a stimulus package coming through soon.

Spot platinum was last quoted at $989.50 an ounce, down 0.1 per cent from its last finish of $991.50, while palladium was at $189.50 an ounce, 2.6 per cent lower than its previous close of $194.50.

Platinum has posted modest gains since the beginning of the year after a sharp sell-off in the last nine months of 2008, which knocked prices down 65 per cent from their March highs.

However, it is still likely to suffer in 2009 as demand declines from carmakers, the major consumers of the white metal.

Investec cut its 2009 platinum forecast by 28 per cent to $970 an ounce, although it said it remains positive on the longer-term outlook.

Spot silver was quoted at $11.28 an ounce, up 1.8 percent from its previous session close of $11.08.

The world's largest silver-backed exchange-traded fund, the "Shares Silver Trust", said its bullion holdings rose one per cent or just over 55 tonnes on January 8.

Gold ended just a tad lower in a back-and-forth trading session last week on the back of a dollar bounce, after a long-awaited non-farm payrolls report showed US job losses in December were not as dismal as the market had feared.

"The gold market right now is totally following the euro. Even though the job number came in where it was expected, it is still going to be a slow period for dollar growth," and that should benefit gold, said Frank McGhee, head precious metals trader at Integrated Brokerage Services.

The government report showed US employers cut payrolls by more than half a million in December, driving the unemployment rate to its highest level in 16 years.

In addition, short-covering ahead of the weekend and heightened geo-political tensions also lifted gold from its session lows, traders said.

Spot gold was at $855.60 an ounce, down just a hair from its late Thursday quote of $856.10.

Gold futures for February delivery settled up 50 cents at $855.00 an ounce on the Comex division of the New York Mercantile Exchange.

"The non-farm payrolls were only a few thousand off consensus, so that took some of the surprise away from the market," said BNP Paribas analyst Michael Widmer.

Gold is taking its cues predominantly from the currency markets.

The dollar turned higher against the euro in choppy trading after the data, with the single currency hitting a session low of $1.3588.

A stronger dollar tends to pressure gold, which is often bought as an alternative asset to the US currency.

While the data was very poor, Widmer said, recent economic reports from the euro zone economies have also been weak, draining support from both the dollar and the euro.

Jewellery buying is relatively lackluster and strong demand for investment coins and bars is said by traders to have slackened since its autumn peak.

In India, the world's leading market for gold jewellery, buying remains muted with prices at relatively high levels.

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