The long-term positive outlook has been damaged and a potential attack of the $1800 level looks now a very long way off, but a lot can happen in a single week. I only want to mention Greece, Spain, Fiscal Cliff, US and Japan public debt situation in order to take last Friday’s gold price movement into perspective.
Economic Background
Europe: The Spanish 10-year bond yield closed the week 7 basis points higher at 5.66 per cent, while the comparable rate for the Italian 10-year bond yield finished at 4.94 per cent.
US: The Non-Farm-Payroll (NFP) numbers for October showed that 171,000 jobs have been created, against a median expectation of about 140,000. The NFP numbers for September have been revised upwards to 148,000. However, the unemployment rate rose to 7.9 per cent. Consumer confidence rose to 72.2 in October 2012, up from 70.3 in September of the same year. The reading of 762.2 represents the highest reading since February 2008. The Institute for Supply Management’s (ISM) factory index rose to 51.7 in October 2012, up from 51.5 in September 2012.
China: The Purchasing Managers Index (PMI) for the non-manufacturing industry rose to 55.5 in October 2012, up from 53.7 in September 2012. The Purchasing Managers Index for the manufacturing industry rose to 50.2 in October 2012, up from 49.8 in September 2012. The Indian Rupee finished the week at 53.81 to the US dollar.
Gold: $1677.50 – down $32.50 from last week
The gold market breached the $1700 very convincingly last Friday and was followed by unpleasant scenarios. More long liquidation mixed with fresh short selling pounced on the market, where no immediate sizeable buying was evident whatsoever. Some analysts expected a potential fall back towards the $1650 level, but others think this episode will be rather short-lived. The overall strength of physical buying out of India has been mixed or slightly disappointing until now and this fall in the gold price represents a great opportunity in the short-term.
The premium from Gold over Platinum fell last week to $140.
The latest Commitment of Traders Report (COTR) shows that there has been a significant reduction of long positions, coupled with a small increase in new short positions. The COTR report is based on positions at the close of last Tuesday (October 30). This trend has most certainly been continued after last Friday`s price action.
Silver: $30.90 – down $1.15 from last week
Silver finished the week significantly lower and further tests to the downside cannot be excluded from these levels. The closeness from silver to gold did the metal no favour last week and the price fall in gold translated itself directly and swiftly in the silver price performance. The metal closed not far away from the lows of the week, which were seen trading at $30.75. A break of $30.70 would imply that a test of $30.17 and of the $30 level afterwards could still be in the cards. However, this would normally only happen if the market would see further selling pressure coming from gold, and that is where we expect bargain hunting and festival (Diwali) buying to add some support to the market.
The latest Commitment of Traders Report (COTR) shows that there has been a reduction of long positions, coupled with a sizeable increase in new short positions. The COTR report is based on positions at the close of last Tuesday (October 30).
Platinum: $1538 – down $2 from last week
The discount in gold has decreased to $140. Platinum prices recovered reasonably well last week, from the long liquidation pressure seen in earlier weeks. However, platinum could not completely escape the strong sell-off from gold and closed the week in near unchanged condition.
The situation for platinum is more difficult than in its sister metal, palladium, and more news headlines trading out of South Africa can be expected. The fundamental outlook for platinum is much more uncertain, but there is no reason not to expect 2013 to be another year of mined metal surplus and only a significant change in world economic growth could influence this balance in a positive and meaningful way. Political and important social issues would make it very difficult for the mining companies to consider putting mines on maintenance only or allowing part-closures in South Africa.
The latest Commitment of Traders Report (COTR) shows that there has been a reduction of long positions, coupled with an increase in new short positions. The COTR report is based on positions at the close of last Tuesday (October 30).
Palladium: $597 – up $4 from last week
Palladium traded most of last week above the $600 level and succumbed to lower levels only last Friday, in sympathy with the strong sell-off in gold. The fundamentals for palladium are improving with the data from China, as well as the recent numbers from the US, indicating that these two very important economies are on slow path to recovery and economic growth. This should bode well for palladium in 2013. There might still be some pressure on palladium over the course of the next few weeks, initiated mostly from the other precious metals, but palladium is in a good position to weather any storm.
The latest Commitment of Traders Report (COTR) shows that there has been a small reduction of long positions, coupled with an increase in new short positions. The COTR report is based on positions at the close of last Tuesday (October 30).
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