Italy and Greece are now being led by experienced bankers and technocrats, and it still remains to be seen if they can fulfill the sky-high expectations placed on them by domestic and international audiences. To a certain extent, Greece has fallen from the limelight during the last week.This may be a sign that the austerity measures, and their accompanying requirements, have been accepted and are being implemented. Italy`s two houses have given Prime Minister Monti the vote of confidence and the difficult job of implementing cuts will hopefully begin in the very near future. The markets stepped back from the danger level of seven per cent in the auctions towards the end of the week, with lower interest rates for Spanish and Italian bonds. This may have been due to continuous buying by the European Central Bank, but it also indicates that the markets might be prepared to see what the next steps by the Eurozone members are going to be. It is likely that politicians can now expect to work for nearly a month and a half, relatively stress-free, before the next big summit that is scheduled for the 9th December. The impending Spanish elections should also be closely watched, for indications of change in Spain’s policies. The very high unemployment levels could be a decisive factor in the polls.
Gold : US $ 1724.00 – down US $ 64.50 on the week. Gold fell heavily towards the end of the week as a lot of short-term longs liquidated. The market broke through the support at 1750 and fell quickly down to 1710. Thanksgiving in the US, and the end of year for a lot of financial institutions and hedge funds at the end of November, led to a lot of book squaring. One reason for the liquidation has been that the level of fear-trade and risk premiums for the Eurozone, have been lowered amidst the changes of the leadership in Greece and Italy. ENBD’s bullish outlook, which the bank held for most of this year, is giving way to a more neutral assessment as gold is changing its affiliations too often recently. It has become very difficult to predict its correlation from moving with a stronger Euro, or with higher equity prices, to representing the fear-trade when political situations get more confusing. This behaviour indicates a growing uncertainty inside the investment community and the prices for gold can easily be influenced by very short-term liquidity-driven forces. The craving of market participants for US $ liquidity has also led to an increase in swap activities, whereby gold is being lent to the market in order to obtain US $ for the agreed tenor. There has been more news about central banks buying more gold in the third quarter, but it seems that the investment community has simply shrugged this off, at least for the moment.
Option volatilities midrates: Gold atm
1 month 23.80 % unchanged
3 month 26.70 % unchanged
6 month 28.10 % unchanged
1 year 29.60 % unchanged
EFP (Exchange for physical) midrate: Spot Gold to December COMEX: US $ 0.70
ETF: Holdings stand at 2408 tons overall
Support: 1708 and 1692 Resistance: 1737 and 1804
OUTLOOK: Neutral
Silver: US $ 32.35 – down US $ 2.35 on the week. Silver has not been the biggest loser of the week in percentage terms, with a seven per cent drop. The honour of the week’s biggest loser has to go to palladium, with a more than nine per cent drop. Silver, and actually all the white metals, have traded the whole week in the wake of what happened to gold. It appears that investors are tired of ideas and almost done for the year, which will lead to erratic and large moves for silver, within a very much diminished liquidity pool. We are looking towards a bearish scenario with some more liquidation taking place unless a strong impetus from gold can save the day. The target has to be to hold the US $ 30 level for the remainder of the year.
Option volatilities midrates: Silver atm (at the money)
1 month 47.00 % up 2.00 %
3 month 47.00 % up 2.00 %
6 month 46.50 % up 1.50 %
1 year 45.50 % up 1.00 %
EFP midrate: Spot to December COMEX Silver: US $ minus 1.00 cent
ETF: The total holdings are now 14905 tons
Support: 30.00 and 28.35 Resistance: 32.45 and 34.10
OUTLOOK: Bearish
Platinum: US $ 1584 – down US $ 56 on the week. Platinum also traded pretty aimlessly during the early part of last week, with a sell-off on Thursday as it followed the lead given by gold. The ratio level of a discount of US $ 100 plus against gold has been established and I do not expect any other stimulus to be able to change the apathy of platinum. It will continue to follow gold at least until the end of the year.
Option volatilities midrates: Platinum atm (at the money)
1 month 27.00 % down 3.50 %
3 month 28.00 % down 1.00 %
6 month 28.50 % down 0.25 %
1 year 28.50 % unchanged
EFP (Exchange for physical) midrate: Spot to January NYMEX Platinum: US $ 2.20
ETF: Holdings are unchanged at 47 tons.
Support: 1560 and 1545 Resistance: 1650 and 1702
OUTLOOK: Bearish
Palladium: US $ 600 – down US $ 57 for the week. Palladium was the biggest loser of the week, but it simply demonstrates the low level of liquidity in the whole sector. This will carry on, or potentially get worse, as we get closer towards the end of the calendar year. All white precious metals have traded on the coat-tail of Gold and I cannot see this changing, at least in the very
near future.
Option volatilities midrates: Palladium atm (at the money)
1 month 40.00 % up 1.50 %
3 month 38.00 % up 1.00 %
6 month 36.00 % unchanged
1 year 35.00 % unchanged
EFP (Exchange for physical) midrate: Spot to December NYMEX Palladium: US $ 0.20
ETF: Holdings are at 57 tons.
Support: 590 and 550 Resistance: 630 and 660
OUTLOOK: Bearish
Precious Metals Report: Gerhard Schubert, Head of Precious Metals, Emirates NBD
