Special Features
Precious Metals Report By Gerhard Schubert, Head of Precious Metals, Emirates NBD
Europe: The members of the Eurozone have reached an agreement about theintroduction of the ECB as the single Eurozone banking supervisor. The legal
framework should be in place on the 1st January 2013, whilst the ECB is expected to implement the requirement and responsibilities later in 2013.
Europe: The Spanish 10-year yield closed the week at 5.37 per cent, while the comparable rate for the Italian 10-year yield finished at 4.77 per cent.
South Africa: There have been reports from South Africa that workers at mines
operated by Goldfields have gone back to work, after being threatened with the loss of jobs. Amplats have given an olive branch to the strikers by agreeing to hold discussions with recognised unions about pay, in order to hopefully end this protracted
situation.
China: The Gold imports into China have been recorded to be in the region of 512 tonnes for the period of January until end of August 2012. These figures are purely the imports and do not take into account the approximate 250 tonnes output from domestic production.
China: The growth of the Chinese economy slowed to 7.4 per cent in September but industrial production rose to 9.2 per cent vs. a reading of 8.9 per cent in August 2012.
The Indian Rupee finished the week at 53.84 to the US dollar.
Gold US$1722.00 – down US$31 from last week. The gold market finished the week
on or near the lows for the week. The first level of defence at US$1740 was breached and the selling continued unabated last Friday. A lot of the weak longs have been liquidating their positions and that is in itself a positive sign. Physical buying has been
evident during the second half of last week, but physical buying can never stop a trend; it can slow it down and might force a turnaround situation once the technical selling is exhausted.
Purchases from India have been reportedly good, and we have also seen good buying, at these current levels in Dubai. The inability of gold to breach the US$1800 level has led to this US$70 sell-off, but this has cleared the air from the heavily overbought
positioning. Still, the performance has been disappointing and there is a danger that positive price drivers are pushed into the background and lose on relevance, at least in the short term.
Reports from South Africa state that the workers at mines operated by Goldfields SA have returned to work. The offer from the big mining companies (Anglogold Ashanti, Goldfields and Harmony) is currently getting evaluated by the Chamber of Mines, and it seems likely that the proposals will be recommended for acceptance to the miners’ unions.
The premium from Gold over Platinum stabilised last week to just above US$110. The latest Commitment of Traders Report (COTR) shows that there has been a significant reduction of long positions, and a sizeable increase in new short positions.
The COTR report is based on positions at the close of last Tuesday (October 16).
Option volatilities midrates : Gold atm (at the money)
1 month 13.25% down 0.55%
3 month 14.75% down 0.50%
6 month 17.00% down 0.25%
1 year 19.75% down 0.25%
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$0.75
EFP Spot Gold to December Comex: US$0.93
ETF: Holdings are at 2696 tons
Support: 1712 and 1700 Resistance: 1756 and 1796
Silver US$32.05 – down US$1.40 from last week. Silver finished the week down, and more disappointment is evident. Silver has given up a lot of ground but this had to be
expected in an environment driven by liquidation from weaker longs. Silver has been, as most of the time, merely the passenger as the events have been dominated by the price action seen in gold. The reduction of both longs, as well as short positions in the COTR indicate a more neutral and balanced short term outlook, with very little new investor participation.
The COTR report shows that long positions have been reduced, while some short positions have been covered. (End of business Tuesday, October 16)
Option volatilities midrates : Silver atm (at the money)
1 month 24.00% down 0.50%
3 month 26.00% down 1.00%
6 month 28.50% down 0.25%
1 year 30.25% down 0.25%
EFP Spot Silver to December Comex: US$1.60 cents
ETF: Holdings are at 15815 tons
Support: 32.00 and 31.48 Resistance: 33.57 and 34.55
Platinum US$1610 – down US$34 from last week. The discount to gold has increased slightly to US$112. Platinum prices have receded and the market still feels heavy at this moment. There has been fresh news from South Africa about workers not turning up for work, at Lonmin’s Marikana mine. This might be in connection with the arrest of three workers by the police in relation to the intimidation seen at the last
illegal strike. The investment community seems to have lost some interest, at least in the short term towards platinum, and I expect this to show in the Commitment of Traders Report (COTR).
The COTR registered a reduction of long positions, as well as a reduction in short positions (End of business Tuesday, October 16)
Option volatilities midrates: Platinum atm (at the money)
1 month 19.00% down 1.00%
3 month 20.00% down 1.00%
6 month 21.50% down 1.00%
1 year 22.50% down 0.75%
EFP Spot Platinum loco London to January NYMEX: US$3.75
ETF: Holdings are at 50 tons.
Support: 1600 and 1567 Resistance: 1678 and 1712
Palladium US$620 – down US$10 from last week. Palladium had another lacklustre
week. Nothing of substance to report, and the inability to report and sustain gains will invite some downward pressures in the near future, unless the whole precious metals segment will benefit from a spark to the upside. This feels a little bit unlikely at the
moment, but there are so many areas of concern to watch, that one event is all it takes to change the whole sentiment and expectation horizon.
The COTR registered a reduction of long positions, as well as a reduction in short positions (End of business Tuesday, October 16).
Option volatilities midrates: Palladium atm (at the money)
1 month 23.50% unchanged
3 month 24.50% unchanged
6 month 25.00% unchanged
1 year 26.50% unchanged
EFP Spot Palladium loco Zurich to December NYMEX: US $ 0.00
ETF: Holdings are at 61 tons
Support: 600 and 583 Resistance: 654 and 690
