Here are the most recent headlines with an impact on precious metals:
- Moody’s downgrades 15 large global Banks
- UK inflation falls to 2.8 per cent in April
- FED extends operation Twist until the end of 2012. US Dollar 267 billion worth of tenor swap operations will be added to the whole programme
- ECB cuts rating threshold and amends eligibility requirements for some assetbacked securities
- German IFO Index falls to 105.3 in June, down from 106.9 in May, whilst German
- PMI figures weaken to 44.7 in June, down from 45.2 in April
- France, Germany, Italy and Spain agree to a Euro 130 Billion growth package.
- They also move closer towards the introduction of a tax on financial transactions
- The Indian rupee finishes the week at 57.06.
Gold US$1572.50 – down US$55.00 from last week. The Commitment of Traders Report (COTR) for the week ending Tuesday, 19th June 2012, shows a large increase of long positions, and a reduction of short positions. These figures are from close of business, Tuesday 19th June 2012, and it has to be expected that a lot of these new long positions have already been liquidated since the decision of the Federal Open Market Committee (FOMC) meeting was communicated. It seems that QE3 is the difference between gold at US$1500 and US$1800.
However, it would be much too easy and simple to lay the slump in gold prices solely at the doorstep of the Federal Reserve Bank. Physical buying is significantly below “normal” levels, and gold imports into India continue to suffer as a result of the very high gold price in Indian Rupees. Many analysts expect this trend of the Indian Rupee to continue, which will further diminish expectations from the demand side. There are pockets of additional demand in other South East Asian countries but they cannot take up the slack from the massive lack of Indian import figures. While the European currency issues can be expected to go on for some time, it is not certain how gold prices react to these issues. Some days the risk-on attitude prevails, while on others gold strongly follows the risk-off mode. Overall, gold is still holding reasonably well, but the dangers to the downside are increasing.
Option volatilities midrates: Gold atm (at the money)
1 month 18.00% down 2.50%
3 month 19.00% down 3.00%
6 month 22.00% down 1.50%
1 year 23.50% down 2.00%
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$0.50
EFP Spot Gold to August Comex: US $ 0.50
ETF: Holdings are at 2497 tons
Support: 1554 and 1525; Resistance: 1598 and 1640
Silver: US$26.88 – down US$1.79 from last week. The Commitment of Traders Report (COTR) shows a marginal increase in existing long positions and also a minimal increase of short positions. Silver has been under severe pressure, and ENBD monitored the lowest close of a week since January 2011. Last Friday’s breach of US$26.70 moves the goalpost towards prices last seen in November 2010. The support level at US$26.50 is quite significant as the next support level at US$25.20 is relatively minor. The next strong support level will only be found nearer the US$21.50 mark. It is of little consequence to add that silver has not been specifically targeted, and the losses are part of a much wider downtrend in commodity prices.
Option volatilities midrates: Silver atm (at the money)
1 month 31.50% down 2.50%
3 month 33.00% down 2.50%
6 month 33.50% down 2.50%
1 year 34.50% down 2.50% EFP Spot Silver to July Comex: US $ minus 7.00 cents
ETF: Holdings are at 15180 tons
Support: 26.50 and 25.20; Resistance: 27.90 and 28.80
Platinum US$1428 – down US$50 from last week. The discount to Gold has decreased to US$140. According to the Commitment of Traders Report (COTR), a few new long positions have been established, whilst a strong reduction of short positions have also been monitored. Last week has seen more short covering as supply issues dominated the news. Aquarius (4th biggest producer) announced mothballing Marikana mine two weeks ago, and added the mothballing of Everest mine two days ago. Everest did account for 21per cent of the total production of Aquarius, whilst Marikana accounted for 11 per cent of the company’s production. It appears that these current price levels are not economically viable for the South African producers. The immediate danger is that these short coverings, which we have seen, have weakened the previous strong support shown at the US$1400 level. A breach of that level and of the US$1385 mark could even accelerate the downward price trend.
Option volatilities midrates: Platinum atm (at the money)
1 month 20.00% down 3.00%
3 month 22.75% down 1.25%
6 month 24.00% down 0.50%
1 year 25.50% down 0.50%
EFP Spot Platinum loco Zurich to July NYMEX: US $ minus 1.25
ETF: Holdings are at 46 tons.
Support: 1400 and 1385; Resistance: 1500 and 1550
Palladium US$605 – down US$20 from last week. The latest COTR report shows a reduction in long positions, as well as a reduction of short positions. Palladium’s stable showing over the course of the last week might be in danger, as a whole raft of commodities are paying tribute to the worsening world economic situation. There has not
been anything specific last week which could have influenced the price situation negatively, Switzerland growing exports even indicating a reduction of stockholdings, but the whole commodity sector is under renewed pressure.
Option volatilities midrates: Palladium atm (at the money)
1 month 25.00% down 1.00%
3 month 25.75% down 1.25%
6 month 26.25% down 2.00%
1 year 30.00% down 1.00%
EFP Spot Palladium loco Zurich to September NYMEX: US $ 0.00
ETF: Holdings are at 63 tons
Support: 595 and 580; Resistance: 650 and 662
