It appears that uncertainty is the only certainty at the moment. The Federal Reserve Bank gave some indications that QE3 is not at all at the forefront of their thoughts at this moment in time, and that prompted some profit taking from short term-orientated investors. It also seems to be the case that the market is already pricing in rate hikes in the US during 2013, and that seems to contradict the FED’s statement about keeping the interest rates at these low levels until the end of 2014.
At last week’s Bloomberg Precious Metals Conference in New York, many of the commentators simply saw developments and interest rate levels in the US as the most important, or in fact, as the only driver for the development of future Precious Metals prices. The U.S. is only one constituent in the global 24/7 operating precious metals market. The substantial rise of the yields in the 10-year gilts market in the US, underline this week’s change in investment behaviour, and this needs to be monitored more closely in the upcoming weeks.
Gold should form part of any prudently managed investment portfolio. A maximum of 5 – 10 per cent holdings in Gold are sufficient in the sense of risk diversification, and should be viewed as a sort of insurance policy against the potential failings of other asset classes.
Gold: US$1660.00 – down US$52 from last week. Gold traded down to the low US$1640 levels and some short covering lifted the price level at the end of the week to the US$1660 mark. Gold came under pressure after the latest statement from the Federal Reserve Bank indicated that the US economy is doing better than expected, and that put the final nail in the coffin for the QE3-expecting investment community. The bar for further implementation of QE3 has been raised again.
Speculative Gold futures positions have been further reduced, according to the latest Commitment of Traders Report (COTR). The technical picture for Gold still looks ok, and the market is still US$130 higher than at the end of 2011. According to a number of marker participants, it seems likely that the longer term investment community (Central Banks, Sovereign Wealth Funds and Pension Funds) are using these setbacks for further purchases of Gold, in their quest to achieve some meaningful allocation of risk diversification in their portfolio.
The announcement from India about doubling the Tax on Gold imports from 2 to 4 per cent will also be of great interest to the market, and the potential damage to the overall physical consumption in India needs to be closely monitored.
Option volatilities midrates: Gold atm (at the money)
1 month 16.00% down 1.00%
3 month 16.70% down 0.80%
6 month 18.20% down 0.30%
1 year 19.75% down 0.50%
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$0.70
EFP Spot Gold to April Comex: US$0.00
ETF: Holdings are at 2490 tons overall, unchanged from last week
Support: 1623 and 1590 Resistance: 1665 and 1705
Silver: US$32.50 – down US$1.77 since last week. Silver is down on the week and paid the price for the weakness in Gold. Silver was not able to draw some comfort from the stability of Platinum and Palladium during the week. Silver trading is to be described best as challenging, but we might enter a phase of consolidation, if the reduction in Silver option volatilities is anything to go by. These reductions, especially in the 1 and 3 month segment are significant and a few weeks trading in a “relatively narrow” trading range could re-awaken the interest from longer term investors.
Option volatilities midrates: Silver atm (at the money)
1 month 29.50% down 3.50%
3 month 32.50% down 1.50%
6 month 33.50% down 2.00%
1 year 34.50% down 2.00%
EFP Spot Silver to May Comex: US $ 0.00 cents
ETF: Holdings are at 15210 tons, 25 tons down from last week
Support: 30.55 and 28.92 Resistance: 34.63 and 35.00
Platinum: US$1667 – down US$15 since last week. The fundamentals have been very much in favour of the PGM’s this week, and Platinum is trading again in a premium over Gold. The decision from Implats to effectively hand over 20% of Platinum resources to the Zimbabwean government will further strengthen underlying worries about supply certainties. It should be expected that there might be some unwinding of Platinum Gold ratio trades over the course of the next few weeks, with some investors cashing in on their one-toone purchases of Platinum against Gold, done some time ago.
Option volatilities midrates: Platinum atm (at the money)
1 month 19.50% down 0.50%
3 month 22.50% unchanged
6 month 24.00% unchanged
1 year 25.50% unchanged
EFP Spot Platinum loco Zurich to April NYMEX: US $1.50
ETF: Holdings are now at 48 tons.
Support: 1600 and 1562 Resistance: 1700 and 1724
Palladium: US$698 – down US$6 since last week. Palladium has held well over the week, and there was no heavy selling pressure, really visible in Palladium. The strength shown by Platinum is also helping the underlying sentiment for Palladium and that might continue for the very near future.
Option volatilities midrates: Palladium atm (at the money)
1 month 26.00% up 1.00%
3 month 29.50% down 0.50%
6 month 32.00% down 0.50%
1 year 34.00% down 0.50%
EFP Spot Palladium loco Zurich to June NYMEX: US$1.10
ETF: Holdings are now at 61 tons
Support: 681 and 648 Resistance: 715 and 730
Emirates NBD will be serving as the Title Sponsor of the upcoming Dubai Precious Metals Conference, together with Standard Bank. An initiative from the DMCC, and organised by Foretell Business Solutions, the Dubai Precious Metals Conference will take place from April 29 – 30, 2012. All the information about this important conference can be found on http://www.dpmc.ae/index.html
