Foreign investment in Pakistan during the same period last year was $2.21 billion in the same period last year and the current account deficit was $8.982 billion.

Analysts point out that higher current transfers and receipt of logistical support payments from the US contribute to lowering deficit.  The US embassy said this month it had released $656 million to Pakistan from its so-called coalition support fund for costs incurred last year in fighting Islamist militants, with $188 million transfered in late April 30 and $468 million in May.

The $188 million is reflected in the current account data for April and analysts said the remaining $468 million will be reflected in May’s data which should show a further narrowing of the deficit.

The trade deficit for the July to April period of the 2009/10 (July-June) fiscal year was $12.24 billion, compared with $14.22 billion in the same period last year.

Analysts said they expected the current account deficit to keep narrowing on falling international oil prices.

“We see a similar trend continuing in coming months with the recent decline in international oil prices further helping lessen pressure on the BOP (balance of payments),” Qureshi said.

Oil fell below $70 a barrel on Monday, its lowest in more than three months, extending a loss of nearly 17 percent over the past two weeks on fears over Europe’s debts, the weak euro and swollen US oil inventories.

Pakistan recorded a provisional current account deficit of $185 million in April compared with a provisional $40 million in March.

In a quarterly report on the economy released in March, the central bank lowered its forecast for the 2009/10 current account deficit to 3.2-3.8 percent of gross domestic product, from previous estimates of 3.7-4.7 percent.

An International Monetary Fund (IMF) emergency loan package of $7.6 billion agreed in November 2008 helped avert a balance of payments crisis and shore up reserves.

The IMF increased the loan to $11.3 billion in July and approved the fifth tranche of $1.13 billion on May 14.

But foreign investment in Pakistan continues to face decline. Out of total foreign investment, foreign direct investment fell 44.7 percent to $1.77 billion in the July to April period, from $3.20 billion in the year-ago period, the State Bank said.

Worsening security situation, with a Taliban insurgency in the country’s northwest, coupled with chronic power shortages, have kept risk averse investors out of the country .

There was a net outflow of $46.6 million of foreign portfolio investment in the first 10 months of this (July-June) fiscal year, compared with a net outflow of $992.6 million in the same period last year.

Authorities imposed a floor on the Karachi Stock Exchange benchmark index in August 2008 as political uncertainity and economic and security worries drained investor confidence.

The floor discouraged new investment and also led to a sharp outflow of funds, as foreign investors sold holdings in off-market trade.

What are Leveraged ETFs?

Leveraged ETFs can be defined as Exchange Traded Funds that use a combination of derivative and debt to enhance returns for investor. Here is a simple example of how a leveraged ETF works. Let us say a leveraged ETF tracks the S&P 500 Index.

Assume that for every invested dollar in the fund, it uses $1 in debt. Now, if the index moves up by 1%, the fund will give the investor a return of 2%. So, for every $100 invested by the investor, they will get a return of $2 in a leveraged fund, whereas in a normal ETF, return will be merely $1.

Of course, there will also be transaction cost, management fees and the interest on the debt, which will reduce some of the return on a leveraged fund. So, the investor who invests $100 in such a fund will probably make $1.50, if the index moves up by 1%. That is 50% more than what they will make in a normal fund.

But, is the risk worth taking?  We don’t think so.

Why Leverage is not a great idea?

Well, a lot could go wrong if you are leveraged. One just needs to look back at the financial crisis and see how dangerous leverage can be.

Banks and hedge funds that went bust during the financial crisis were all highly geared. Even before the financial crisis, there have been hedge funds that have gone bust because they were highly geared.

From Long Term Capital Management, the famous hedge fund that had Nobel laureates in its ranks, to Amaranth, whose star trader was one of the highest paid hedge fund managers in the world at one time; there have been many funds that have collapsed due to high leverage.

Lehman Brothers, the investment bank that survived the Great Depression, collapsed in the financial crisis as it was geared 40 times, i.e. for every $1 of equity; Lehman was using $40 in debt.

Now, you stand to make a stellar return on equity if things go in the direction you want them to go, but can go horribly wrong if they go only slightly against you. And leveraged ETFs are no different.

So what could go wrong with a Leveraged ETF?

Let us look at an example of how things could go wrong in a leveraged ETF. Suppose you have a leveraged ETF that is tracking the Japanese Index. Now, let us assume that the fund is geared 3 times, i.e. for every $100 invested in the fund; it uses $300 in debt. If the Japanese Index moves up 1% – the direction you want it to move because you are long the index – you make $3. After deducting all the costs, you are left with $2.50. A decent return, and more than what you could have made in normal fund. But, if the index moves in the opposite direction, i.e. it goes down by 1% you have lost 3% of your equity.

And imagine how the loss will accentuate if the index drops by 10%. You would lose 30% of your equity in just one day. And let us say you were geared 4 times instead of 3. Now you lose 40% of your equity. No wonder that highly geared banks and hedge funds were wiped out in a day.

Understanding how leveraged ETFs work

One very important thing for investors is to understand is how these leveraged funds work. A fund that is geared two times, promises to generate double the return of the index it is tracking. Theoretically, this means that if the Dow Jones returns 20% in a year, a 2x fund should return 40%. However, this is not the case as the fund tracks daily changes in an index and so they may double your daily return, but things could be different when we talk about annual returns.

Let us get back to the $100 we had invested earlier. To simplify the example, we are not assuming any costs and management fees for the fund. Now, if the index goes up 10%, you gain 20%, assuming the fund is geared 2 times.

So, your $100 is now $120. Because the fund has to balance the leverage ratio and keep it at two times, it will have to adjust the debt level by increasing it by $20. So, now you have $120 in equity and $120 in debt.

Now, the next day the same index drops 10%. You lose $24. Your equity is now down to $96. So, you have lost more than the index. Yes, on a daily basis, your gains and losses are double that of index. But over a two day period you have lost $4, 4 times what the index lost. If you were invested in a normal ETF, you would have been at $110 after the 10% gain on day one, and been down to $99 after the 10% loss on day two. So, overall, you would have lost $1. But with a leveraged ETF, you stand to lose $4, 4 times what you would have lost in a normal ETF.

Tracking Emerging and Frontier markets

Till now, we have only spoken about leveraged ETFS. What if you have a leveraged ETF that tracks an index of an emerging or frontier country? Yes, you can make a lot of money by investing without using any leverage. Imagine the returns you can make if you are geared. There are ETFs that track indexes of some of the most volatile stock markets in the world. Some of these markets see huge jumps and falls on daily basis. And like we explained earlier, daily changes can have tremendous impact on leveraged ETFs.

Leveraged ETFs on indexes of volatile markets can generate stellar returns, if the markets go in the favored direction. But, investors stand to lose big time, if their bet goes wrong.

A final word

Through this article, we have explained the effect leverage can have on your returns. Using leverage to enhance returns is a great idea, if you can predict the direction in which the markets will move. Some years ago, Long Term Capital Management thought it could do this, with the help of a star studded team and the most sophisticated investing strategies.

But, it only took a few days of losses and the fund went bust.

Downward spiral accelarated after Standard and Poor’s  downgraded Greece’s government debt to junk status and sliced Portugal’s ratings by two levels.

The downgrades fueled worries that a sovereign debt problem could spread to other areas of Europe, prompting Asian short-term players to sell the common unit and triggering stop-loss selling-orders, dealers said.

In early Asian trading, the European single unit fell to $1.3144, its lowest level since April 29, 2009. Against the yen, the currency dropped to Y122.37, its weakest since March 25.

S&P’s downgrade was a surprise. Although some sort of optimism had emerged toward a possible bailout for Greece late last week, market sentiment has now worsened.

As of 0130 GMT, the euro stood at $1.3186 compared with its New York overnight level of $1.3189. Against the yen, the currency exchanged hands at Y122.82 compared with Y122.83.

The U.K. pound was at Y142.11 and $1.5260, from Y142.14 and $1.5253 respectively late Tuesday. The Australian dollar was at Y85.55 from Y85.23. The New Zealand dollar stood at Y66.33 from Y66.22.

Asian currencies opened lower Wednesday, as traders said jitters on Greece’s downgrade should lead to consolidation moves and profit-taking after recent rallies drove the likes of the Korean won and the Singapore dollar to multi-month highs just days ago.

Against the won, the U.S. dollar soared to a two-week high of KRW1,123 from KRW1,110 late Tuesday. The dollar also rose to a one-week high of MYR3.2180 against the Malaysian ringgit, Asia’s best performing currency so far this year, from MYR3.1850 late Tuesday.

We would expect most emerging market assets and currencies to remain under pressure in the short term at least, all the more since emerging markets have welcomed large capital inflows over the past few weeks.  Still, we remain positive on Asian currencies on economic fundamentals in the longer-term, and it could be the case that in any risk-deleveraging trade Asian currencies outperform other emerging market assets.

The euro may fall to $1.3130 and Y122.00 in the Asian session as regional shares were sharply lower after the Dow Jones Industrial Average closed down 1.9% overnight, dealers said.

Japan’s Nikkei 225 was down 2.8%, Australia’s S&P/ASX 200 was off 1.6% at 4,800 and South Korea’s Kospi Composite was down 1.7%.

With the euro already weakening, “speculators may throw fuel on the fire,” which could accelerate euro-selling, said Motonari Ogawa, a senior dealer at Barclays Capital.

In the near term, the euro may extend its losses to $1.3000 and $120.00 if any negative news about Greek debt issues emerges, reinforcing the view that the euro-zone debt problem may persist for a while, traders said.

Meanwhile, the dollar stood at Y93.13 as of 0130 GMT compared with Y93.12 in New York late Tuesday. The dollar may fall to Y92.70 if share markets stagnate, dealers said. But a further decline will likely be limited as players refrained from more active trading ahead of the outcome of the two-day meeting of the Federal Open Market Committee due later in the day.

As key Chinese economist cautioned that appreciation of local currency will drive exporters out of business, China’s yuan slid lower against the U.S. dollar late Friday afternoon due to the U.S. unit’s strength against other major currencies during Asian trading hours.

Comments by Chinese bankers today underscores the domestic political pressures on Beijing amid growing international calls for China to let the yuan rise.

Vice Commerce Minister Zhong Shan told Wall Street Journal Thursday ahead of a visit to the U.S., said that the profit margin on many Chinese export goods was less than 2%.

On the over-the-counter market, the dollar was at CNY6.8265 around 0930 GMT, up from Thursday's close of CNY6.8261. It traded between CNY6.8258 and CNY6.8267, Dow Jones reported.

The ICE Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, rose to 80.429 at 0930 GMT from 80.272 late Thursday in New York.

However, the dollar's gains in China's onshore market were capped by the steady central parity. The dollar-yuan central parity was set at 6.8263, almost unchanged from 6.8262 Thursday.

“The market is quiet today, as the strength in the overnight dollar only pushed the central parity higher by one point,” said a Shanghai-based foreign bank trader.

Traders said they expect the dollar to climb in the onshore market as dollar demand is likely to increase because of import payments at month-end.

Offshore, one-year dollar-yuan nondeliverable forwards were at 6.6601/6.6641, down from 6.6650/6.6700 late Thursday.

Mr. Zhong talked about a potential tipping-point effect to describe the fragile situation of many exporters. “Water doesn’t boil if it is heated to 99 degree Celsius. But it will boil if it is heated by one more degree,” he said. Likewise, “a further rise in the yuan by a very small magnitude might cause fundamental changes” to exporters in China, he said.

The yuan climbed 21% against the dollar from 2005 to 2008, when China adopted a managed-float currency system under which the yuan’s value was linked to a basket of currencies. But the yuan has been kept almost unchanged against the dollar since the outbreak of the global crisis to help Chinese exporters, which has prompted much criticism from abroad.

 For economies like Pakistan, funds repatriated by non-residents to family and friends back home, provide the most tangible link between migration and development. But after September 11attacks, it has become increasingly difficult for Pakistanis to get work visas which had resulted in negative growth of remittances.

Analysts believe that latest increase is due to strict regulation of foreign exchange market. Majority of the informal money transfer and forex firms have changed their business practice or disappeared.

Analysts point out that since remittances are unilateral transfers they do not create liabilities. And they usually come with advice—from migrants who have seen better—on how to best use them. Thus, remittances are not simply money, but value-added money.

NRPs sent $588.78 million in February 2009 compared to $641.32 of February 2010. The inflow of remittances in July-February, 2010 period from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,317.17 million, $1,173.37 million, $1,148.86 million, $826.93 million, $596.26 million and $171.41 million respectively as compared to $1,035.55 million, $1,156.51 million, $962.30 million, $783.39 million, $344.08 million and $150.05 million respectively in the July-February, 2008-09 period.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first eight months of the current fiscal year amounted to $550.65 million as against $486.34 million in the same period last year. The monthly average remittances for the July-February 2010 period comes out to $723.36 million as compared to $614.83 million during the same period of last fiscal year, registering an increase of 17.65 percent.

During February 2010 remittances from Saudi Arabia, UAE, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $149.45 million, $136.88 million, $111.48 million, $89.21 million, $45.91 million and $13.48 million respectively as compared to $123.64 million, $166.62 million, $127.48 million, $93.09 million, $54.12 million and $18.31 million in February 2009. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during February 2010 amounted to $41.13 million compared with $58.04 million in the same month of last year.

The true size, including unrecorded formal and informal flows, is believed to be significantly larger. Remittances total at least three times official development assistance and are the largest source of external financing.

 The Obama administration’s proposed banking regulations and the delay in the Senate’s vote to reconfirm Ben Bernanke as Federal Reserve chairman capped a week of negative news for riskier assets, after revived concerns over Greece’s sovereign debt and speculation that China will take further steps to tighten monetary policy triggered the flight to safe-haven assets.

“We’re ending the week in a sour and uncertain note,”  Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York told Dow Jones.

In that environment, assets and currencies viewed as safest, particularly the yen, benefits, he said. The dollar dipped at one point to Y89.78, the lowest since Dec. 18, while the euro sank to a nearly nine-month low of Y126.55.

Late Friday afternoon in New York, the euro was at $1.4138 from $1.4097 late Thursday, according to EBS via CQG. The dollar was at Y89.92 from Y90.33, while the euro was at Y127.10 from Y127.27. The U.K. pound was at $1.6100 from $1.6115. The dollar was at CHF1.0415 from CHF1.0426. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 78.280 from 78.395. As a result, Deutsche Bank’s PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was up 0.22% from late Thursday, while its PowerShares US Dollar Index Bullish (UUP) was down 0.17%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE’s Dollar Index.

The euro gained against the dollar, even though it faces its own problems over sovereign-debt worries in Greece.

Because of those debt worries, the euro’s gains are likely to be limited, said Jacob Oubina, currency strategist at Forex.com in Bedminster, N.J. “Europe is riddled with all kinds of debt problems, but the U.S. dollar” is under pressure of its own “from the draconian Obama proposals,” Oubina said.

After China reported that its economy expanded at a faster pace in the fourth quarter of last year, investors fretted that China would take additional steps to tighten monetary policy, including raising the amount of deposits banks must keep on reserve as well as boosting the yield on three-month bills that it sells to financial institutions.

 ”I think the bottom line here is it’s thrown the health of the recovery into a state of flux,” said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn.

The commodity-backed Canadian currency fell on the dollar after Canadian retail sales decreased 0.3% in November from October–the first drop in four months.

Meanwhile, investors were keeping an eye on the Swiss franc after Swiss National Bank President Philipp Hildebrand reiterated Friday in an interview with The Wall Street Journal that the SNB would fight any “excessive” appreciation of the Swiss currency.

With the euro-zone struggling with fiscal problems on its periphery, most acutely in Greece, the franc has faced more upward pressure recently because it is seen as a “flight-to-quality” currency.

Economic data showing a U.S. consumer still under stress, continuing concern over sovereign debt in the euro zone and a possible further tightening of Chinese fiscal policy all worked together to lead investors to the safe-haven dollar and yen.

“Every major region has its own bad story that seems to be coming back into play,” said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J.

Late Friday in New York, the euro was at $1.4376 from $1.4504 late Thursday, according to EBS via CQG. The dollar was at Y90.82 from Y91.09, while the euro was at Y130.54 from Y131.93. The U.K. pound was at $1.6255 from $1.6335. The dollar was at CHF1.0269 from CHF1.0182.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 77.222 from 76.729.

As a result, Deutsche Bank’s PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was trading down 0.68% from late Thursday, while its PowerShares US Dollar Index Bullish (UUP) was up 0.57%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE’s Dollar Index.

The euro was among the worst-performing major currencies, slipping more than 0.85% against the dollar and nearly 1.25% against the yen by late Friday.

Continuing concerns over Greece, which is struggling with large deficits and doubts over its sovereign creditworthiness, also weighed on the euro.

European Central Bank President Jean-Claude Trichet said after Thursday’s rate-setting meeting the central bank wouldn’t offer any euro zone member “special treatment,” and said Greece would not be exempt from collateral requirements.

“Fiscal factors have weighed on the euro when those things have been hitting the headlines,” said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.

Adding to investors’ flight from riskier assets was concern over the U.S. consumer, heightened by the release of J.P. Morgan’s fourth-quarter earnings, which noted losses in its card services, consumer lending and retail financial services segments.

J.P. Morgan Chief Executive James Dimon expressed a cautious outlook, noting that “consumer-credit costs remain high, and weak employment and home prices persist.”

Survey data released Friday showed the U.S. consumer–considered key to an economic turnaround–remained stressed. The University of Michigan/Reuters consumer sentiment index’s preliminary reading for January edged up to only 72.8 from the final December reading of 72.5. Economists had expected sentiment to improve to 74.0.

Currencies reacted little to other U.S. economic data released Friday, including the seasonally adjusted consumer price index, which increased slightly, in line with expectations. Industrial production also registered an uptick, in line with what economists had forecast.

“The numbers that were out [Friday], particularly the consumer confidence data, were not great,” sparking some concerns over the pace of the U.S. recovery, said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, N.J.

Speculation over whether China would further tighten fiscal policy to put the brakes on growth, fueled by data that showed rising bank lending, also led investors away from risk-positive currencies. The yen benefited most from the flight to safety.

Chinese financial institutions extended almost double the amount of new yuan loans in 2009 compared to a year earlier, according data issued Friday on the People’s Bank of China’s Web site.

Earlier this week, in a small step toward tightening, China’s central bank raised its yuan reserve requirement ratio by half a percentage point in a bid to stave off inflation.

If China puts a brake on its economy, and if global growth generally slows, the commodity-backed currencies of Australia, Canada and New Zealand could suffer. All were down against the U.S. dollar Friday.

Growth-sensitive assets including oil, gold and other metal prices slumped. The Australian dollar led the decline in the commodity-backed dollar bloc, dropping nearly 0.9% against the U.S. dollar.

The Beige Book report, a compilation of anecdotal evidence on economic conditions from each of the 12 Fed districts, said that ten districts reported increased activity or improvement in conditions, while the remaining two reported mixed conditions.

This marks an improvement from the Beige Book report released in early December, which showed that eight districts experienced increased activity or improving conditions compared to four districts that reported little change and/or mixed conditions.

While the report said that most districts reported a slight increase in consumer spending during the recent 2009 holiday season, spending remained far below 2007 levels.

The Fed noted, “Consumers were variously described as cautious, price sensitive, and focused on necessities, but sometimes willing to spend on discretionary purchases.”

Retail inventory levels remained very lean in nearly all districts, the report said, with some Chicago retailers even running out of high-demand items during the holiday season.

The Beige Book also noted that non-financial services activity generally indicated an upward trend, although some area reports were mixed. In the five districts that reported on transportation services, volumes were up slightly or mixed.

Manufacturing activity also increased or held steady in most of the Fed districts, with the New York Fed reporting a general pickup in activity, broad optimism, and some increase in employment.

The districts reporting on manufacturers’ expectations for the near term all revealed optimism, although only Boston and Philadelphia reported that firms were planning to increase capital spending.

While the report also showed that home sales increased in most Fed districts, the Fed also noted that loan demand continued to decline or remained weak in most districts.

On the employment front, the Fed said labor market conditions remained soft in most districts. Nonetheless, New York reported a modest pickup in hiring and St. Louis said several service-sector firms recently announced plans to hire new workers.

The Beige Book concluded by saying that price pressures remained subdued in nearly all of the Federal Reserve districts, although increases in metals prices were noted in some districts.

But the greenback rose against other higher-yielding currencies, benefiting from the flight from risk triggered by monetary tightening in China and the stock market’s weakness on disappointing earnings reports.

“It’s all about risk aversion,” said Camilla Sutton, a currency strategist at Scotial Capital in Toronto.

The Japanese currency also advanced sharply against the euro, pushing Europe’s common currency to a session low at Y131.64, its lowest level since Jan. 5. The dollar dipped to a session low of Y90.73, its lowest level since Dec. 21.

Tuesday afternoon in New York, the dollar was at Y90.95, down from Y92.06 late Monday, while the euro was at Y131.73, down from Y133.78, according to EBS via CQG.

The euro was at $1.4489, down from $1.4524 late Monday.

The U.K. pound was at $1.6165, up from $1.6112.

The dollar was at CHF1.0185, up from CHF1.0157. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.011, up from 76.983. As a result, Deutsche Bank’s PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was trading down 0.02% from late Monday, while its PowerShares US Dollar Index Bullish (UUP) was unchanged from a day ago.

The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE’s Dollar Index.

For most of 2009, the dollar weakened against the yen, hitting a 14-year low of Y84.82 in late November, as near-zero interest rates in the U.S. prompted investors to borrow cheap dollars to fund purchases of higher-yielding currencies, a role traditionally played by the yen.

The dollar rallied against the yen through December and early this year, but has retreated since Friday as short-dated Treasury yields, the most sensitive to official rate changes, have fallen.

Friday’s disappointing U.S. jobs report suggested that the Fed will remain on hold for a while, triggering renewed weakness in the greenback.

Around 10:54 a.m. EST (1554 GMT), lightly traded but nearby January gold is $20 higher at $1,158.20 an ounce on the Comex division of the New York Mercantile Exchange, while most-active February climbed $20.10 to $1,159 and peaked overnight at $1,163, its most muscular level since Dec. 8.

“It’s about the dollar and the very strong Chinese trade data,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

The euro has been as high as $1.4558 against the dollar, its strongest level since Dec. 16 and up more than 1 cent compared to $1.4414 late Friday. Investors often buy gold as a hedge against dollar weakness. Furthermore, a softer greenback makes all dollar-denominated commodities cheaper in other currencies and thus can help demand.

The dollar remains undercut by a softer-than-forecast U.S. jobs report Friday.

“We have dollar weakness because the employment data pushed any thoughts of any [Federal Reserve] rate hikes out further,” Lesh said. “So we lost some dollar support and that, of course, is supportive for gold.”

Currency analysts also said a 17.7% rise in Chinese exports last month added to the pressure on the dollar.

“We also had very strong Chinese import data,” Lesh said. “That shows, as of right now, the appetite for commodities remains pretty strong.”

China’s imports rose nearly 56% last month. This improved demand picture has helped a number of commodities, Lesh continued.

Gold took off at “warp speed” as soon as overnight screen trading began late Sunday, said Jon Nadler, senior analyst with Kitco Metals. The report showing what he termed a “commodities shopping spree” in China triggered a return of risk appetite.

The overnight surge in gold was accelerated by buy stops, or pre-placed orders triggered when certain chart points are hit, said Matthias Detremmerie, founder and precious metals analyst at Goldessential.com. In fact, he said, when electronic trading opened Sunday night, it took only seconds for the market to break above Friday’s high of $1,140 in February gold and more buy stops were hit around $1,143.50.

Short covering was triggered, in which traders buy to exit positions in which they previously sold, Detremmerie continued.

Most-active March silver is up 32 cents to $18.79 an ounce and hit a high of $18.925 that was its strongest level since Dec. 4.

Meanwhile, April platinum is up $24.90 to $1,595.50 an ounce and hit a life-of-contract high of $1,596.20, while March palladium is up $5.85 to $431.