Gold endured another difficult week with more “sweeps” being conducted during relatively illiquid time zones
Here are the latest news with an impact on gold and precious metals prices:
Europe:
- The Spanish 10-year bond yield closed the week at 5.46 per cent.
- The Italian 10-year bond yield closed the week at 4.53 per cent. It appears that the political risk in Italy has risen with the announcement of Mr. Berlusconi to remain not only in the political arena, but also contemplating to run again for the office of Prime Minister in the election, scheduled for March 2013.
- The European Central Bank left the refinancing rate unchanged at 0.75 per cent, while revising the 2013 growth forecast for the Eurozone to a contraction of 0.3 per cent. The 2012 growth figure has also been revised to show a contraction of 0.5 per cent for the whole year. However, the outlook of the ECB for inflation in 2013 has also been lowered to 1.6 per cent, down from an earlier forecast of 1.9 per cent. The outlook for inflation in the Eurozone for 2014 has also been lowered to 1.4 per cent.
- The Bank of England has left the benchmark interest rate unchanged at 0.5 per cent, while no more additional stimulus for the economy has been forthcoming at the Bank’s meeting last week.
- Last Friday was the last trading day for bond holders of Greek debt to submit the papers for the proposed Greek government bond buy-back.
China: The estimates from analysts for the Chinese Industrial Production readings are expected to show a rise of 9.8 per cent, year on year, while Retail Sales figures are expected to show a rise of 14.6 per cent. The official figures will be released on Sunday, 9 th December.
US:
- The Non-Farm-Payroll (NFP) numbers for the month of November were released at 146,000, which is much better than the median forecast of 90,000. However, the NFP numbers for September and October have been revised downwards. The unemployment rate fell to 7.7 per cent.
- The Congressional Budget Office (CBO) of the US estimates that the US might enter into a recession during the first half of 2013, while the unemployment rate is expected to rise to 9.1 per cent in Q4 of 2013, if the “Fiscal Cliff” is not resolved at the end of 2012. It seems that the ramifications in that case would take a lot of time to filter through into the economy, while uncertainties will take hold rather quickly.
- The meeting of the Federal Open Market Committee (FOMC) on December 11th and 12th will give an answer to the question, if the monthly spending of US$ 45 Billion for the Operation TWIST will be used to buy US Treasury securities instead. The balance sheet of the FED was US$ 869 Billion at the end of 2007 and that could reach US$ 4 Trillion by the end of 2014, which would require a revisiting of potential exit strategies from the FED.
- The Michigan Consumer Sentiment Index for December fell to 74.5, down from 82.7 in November 2012.
India: The Indian Rupee finished the week at 54.47 to the US dollar.
Gold US$ 1704 – down US$ 11 from last week
Gold endured another difficult week with more “sweeps” being conducted during relatively illiquid time zones, when the US is already closed and Asia is not fully opened yet. The logic of this behaviour, to push prices lower with relatively small amounts, would only make sense if the originator of these “sweeps” is actually looking to accumulate significantly more gold positions at lower prices once the markets are fully opened and liquidity is plentiful. There has been an announcement from the Bank of Korea that they bought 14 tonnes of gold during the month of November but that has so far been the only Central Bank who has declared their purchases for last month. Others might take a little bit more time but our target of net buying from Central Banks for 2012 of 500+ tonnes seems to be very much achievable. These elevates level of Central Bank purchases made up for the smaller amount of physical gold imports from India during 2012.
It appears that according to official import statistics, India has only imported 398 tonnes in the period April to October 2012 against figures of 589 tonnes for the same period in the previous year. That equals a loss of imports in the region of 32 per cent and is in line with our expected loss of physical off-take from India of approximately 320 tonnes for the full year. The reasons are well documented with the strike at the beginning of the year, followed by a period of adverse currency movement and the resulting all-time-high prices for gold prices in Indian Rupee. The premium from Gold over Platinum fell last week to US$ 100.
The latest Commitment of Traders Report (COTR) shows a very strong decrease in long positions, accompanied by an increase in fresh short positions. (End of business 4 th December).
Option volatilities midrates: Gold atm (at the money)
1 month 11.30% down 0.20%
3 month 12.50% down 0.25%
6 month 14.25% down 0.50%
1 year 17.00% down 0.25%
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: Minus US$ 0.30
EFP Spot Gold to February Comex: US$ 1.20
ETF: Holdings are at 2745 tons
Support: 1674 and 1661 Resistance: 1731 and 1750
Silver US$ 33.07 – down US$ 0.43 from last week
Silver traded down to the support level at US$ 32.50 during last week but managed to bounce back quite quickly and finished the week above the US$ 33 level. The new first resistance level is now already at the US$ 33.50 level and a break of that level would indicate a fresh attempt to rally above the US$ 34 mark.
The silver market was visibly torn between following the weakening price trend in gold and the encouraging performance of the Platinum Group Metals, especially palladium. The latest Commitment of Traders Report (COTR) shows a decrease in long positions, accompanied by a decrease in fresh short positions (End of business 4th December).
Option volatilities midrates: Silver atm (at the money)
1 month 20.50% down 0.75%
3 month 22.00% down 0.25%
6 month 24.00% unchanged
1 year 25.50% unchanged
EFP Spot Silver to March Comex: US$ 5.75 cents
ETF: Holdings are at 16135 tons
Support: 32.50 and 31.85 Resistance: 33.50 and 34.95
Platinum US$ 1604 – up US$ 4 from last week
The discount to gold has decreased to US$ 100. Platinum prices closing nearly unchanged for the week at the US$ 1604 level, but it was a very different picture during the events of last week. Platinum tanked in sympathy with the plunge in gold prices and maintained during most of last week a discount of approximately US$ 120 to gold. However, there seems to be continued workers unrest in South Africa and this will naturally be of significantly more importance for the platinum mining compared with the gold mining industry. Some good industrial customer based buying and some light short covering lifted the prices back up and it appears that the downside might be exhausted for the time being.
The latest Commitment of Traders Report (COTR) shows an increase in long positions, accompanied by a decrease in fresh short positions (End of business 4th December).
Option volatilities midrates:
Platinum atm (at the money)
1 month 16.50% down 0.50%
3 month 18.00% down 1.00%
6 month 19.00% down 2.00%
1 year 20.50% down 2.00%
EFP Spot Platinum loco London to January NYMEX: US$ 0.60
ETF: Holdings are at 50 tons
Support: 1570 and 1545 Resistance: 1630 and 1657
Palladium US$ 696 – up US$ 15 from last week
Palladium has again performed in the midst of adversity, coming from the negative price movements of gold. Prices for palladium have held the US$ 675 level very strongly and these attempts to sell it down were very short lived. It appears to be a strong consolidation, based much more on fundamentals than on speculative involvement. This is clearly very welcome, but it also implies that a slower and steady price progress would be much more preferable and sustainable than a sudden rally. The fundamental strength of palladium is best explained through the strong industrial usage and the structural supply deficit, while the palladium industry does not need to speculate about unrest and strikes to maintain a positive outlook.
The latest Commitment of Traders Report (COTR) shows an increase in long positions, while more covering of short positions have been prominent. The latest surge in long Palladium positions brings the open reported positions close to their record highs (End of business 4thDecember).
Option volatilities midrates: Palladium atm (at the money)
1 month 23.25% down 2.25%
3 month 24.25% down 1.75%
6 month 25.00% down 1.50%
1 year 26.25% down 0.75%
EFP Spot Palladium loco Zurich to February NYMEX: US$ 1.00
ETF: Holdings are at 61 tons
Support: 650 and 633 Resistance: 707 and 718
*Precious Metals Report dated December 1, 2012 by Gerhard Schubert, Head of Precious Metals, Emirates NBD
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