Precious metals are seen broadly bullish in the week ahead, according to the report of Gerhard Schubert, Head of Precious Metals, Emirates NBD.
Gold: 1739.00 – up US $73 since last week. Gold has moved decisively to the upside and the comments from the Federal Reserve Bank have provided the spark to overcome the resistance levels around US $1670. The outlook of at least another two years in a low interest environment, has cemented the role of gold as an asset class in investor’s minds. The diversification efforts from the institutional participants will support gold on dips and provide vital support for the market.
There are some indications that a possible solution for Greece is getting closer, which would enable the next bail-out tranche to be delivered. But the European Summit, beginning on Monday, is the next barometer to evaluate any real progress concerning the European Sovereign Debt situation.
China’s Golden Week has come to a close and the market has done very well during this week of “Chinese” absence. The return of the Chinese markets will add to more physical support on lower levels, but we do not anticipate more aggressive buying on these elevated levels. The chance of some profit-taking should not be excluded as gold has rallied already 11 % during January.
Option volatilities midrates: Gold atm (at the money)
1 month 17.50 % up 1.00 %
3 month 19.50 % up 0.50 %
6 month 21.50 % unchanged
1 year 23.50 % down 0.50 %
EFP Spot Gold to April Comex: US $ 2.70
ETF: Holdings are at 2410 tons overall
Support: 1704 and 1684 Resistance: 1761 and 1800
OUTLOOK: Bullish
Silver: US $33.90 – up US $1.74 since last week. Silver has recorded gains of over 22 % so far this year and this feels like a “runaway train” situation. The enthusiasm and yearning for silver have returned with a vengeance and short positions seem to be doomed. We recommend existing long positions to continue but with tighter take-profit-stops underneath in order to protect some of the gains. Silver Option volatilities indicate that the strong upside move so far has been orderly, but we would expect a change in this situation, if silver was able to move beyond the US $35.40 level.
Option volatilities midrates: Silver atm (at the money)
1 month 36.50 % unchanged
3 month 38.50 % unchanged
6 month 40.00 % up 0.50 %
1 year 41.00 % up 1.00 %
EFP Spot Silver to March Comex: US $ minus 2 cents
ETF: Holdings are at 14950 tons
Support: 33.00 and 32.25 Resistance: 34.00 and 35.40
OUTLOOK: Bullish
Platinum: US $1620 – up US $87 since last week. Platinum has continued its impressive rally and the discount to gold has narrowed to US $120 per ounce. The possibility of profit-taking should not be overlooked, as the first month of the year draws to a close. The little-bit-better than expected economic situation in the automotive industry, especially in the US, has provided a great backdrop for the price rises, but a return to recession in the Eurozone will compensate comprehensively for this. There is an opportunity for “window-dressing” for valuations in the middle of the week but I would urge caution at these elevated price levels.
Option volatilities midrates: Platinum atm (at the money)
1 month 21.50 % down 2.50 %
3 month 24.00 % down 2.00 %
6 month 25.50 % down 1.50 %
1 year 27.00 % down 1.00 %
EFP Spot Platinum to April NYMEX: US $ 2.50
ETF: Holdings are at 46 tons.
Support: 1580 and 1557 Resistance: 1642 and 1675
OUTLOOK: Bullish
Palladium: US $690 – up US $15 since last week. Palladium also performed well last week, but this was a sign of the overall lackluster performance of the week in the precious metals family. A lot of positives have been seen during this first month of the year, but the same reasons for caution in platinum also apply to palladium. We stay on the sidelines for palladium in the short term.
Option volatilities midrates: Palladium atm (at the money)
1 month 34.00 % down 2.50 %
3 month 35.00 % down 2.00 %
6 month 36.50 % down 0.50 %
1 year 37.00 % unchanged
EFP Spot Palladium to March NYMEX: US $ 0.30
ETF: Holdings are at 55 tons.
Support: 685 and 644 Resistance: 724 and 744
OUTLOOK: Bullish
Precious Metals Report by Gerhard Schubert, Head of Precious Metals, Emirates NBD
