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Emirates NBD Precious Metals Report

Congratulations to all the Bulls out there. What a week they had! New all-time highs against an array of currencies - first against the EURO and GBP, followed by the AUD and last but not least against the USD. This latest rally was sparked by the actions and comments from the rating agencies which highlighted and turned the focus very strongly on the Sovereign Debt issues. Italy has passed quite stringent austerity measures through both houses and is looking to start implementing these quite swiftly. Greece has moved a little bit on the news backburner as currently everything that needed to be done has been done. The results of the European Bank stress tests should be viewed, in my eyes, as positive. The FED has NOT endorsed QE3 by any means but they also clearly did not rule anything out, should the economic developments require action. Ultra low-interest rates are there to stay "for an extended period," and possible inflationary concerns have to be weighed up against the developments on the job front. There are growing concerns in the US especially about the very high numbers of youth unemployment. These concerns are limiting the scope of FED’s capabilities substantially. It is also important to note that 2012 is an election year in the US, with all the spectacle of Primaries, Candidate selections and finally the race for the White House itself. All these factors should prove helpful for the Gold price. While they will not directly drive the price, the added uncertainties will help to underpin the performance of Gold. Gold: 1593.50 – Gold is up another 50 Dollars or 3.25 % on the week. The market dispatched of the "old" all-time high quickly and decisively to reach and close within a whimper of the 1600 mark. What are 6 or 7 Dollars these days between friends? The 1600 level is more important psychologically as we expect Option barriers and stop-loss order to be at the level or just above. A break of 1600 could move us very quickly towards the primary target of 1630 but let’s not forget that we have rallied 107 $ in a two-week period. The last week’s rally has largely been driven by adding significant new long positions instead of short covering and that will limit any possible near term gains. I do expect a test and break of 1600 but I would probably use this to square up for the time being and to re-evaluate the picture. The downside danger seems now to be limited to 1480 for the medium term with still a lot of physical buy-orders in the market waiting to be filled at these levels. They might have to step-up but let’s wait and see. Option volatilities mid rates: Gold atm (at the money) 1 month 17.2 % 3 month 18.0 % 6 month 19.0 % 1 year 20.5 % ETF levels gained 28 tonnes to 2175 tonnes overall Support: 1565, 1528.50 and1480 Resistance: 1600, 1630 OUTLOOK: Bullish (hint of caution) Silver: 39.25 – up $ 2.60 or 7.1 % on the week. The 100-day moving average at 37.40 has been decisively dispatched on Wednesday and we have had two higher closes since then. The gain over the last two weeks of 15.8% has changed the outlook for the near future significantly. It is important to regain the $40 level but the same level of caution should be applied for Silver as for Gold. I think it is very much likely that the market will be drawn towards the $40 level, test it, break it but use potential buy-stops and option-related buying to liquidate some of the quite sizeable long positions in the market. The trend is bullish but the sell-offs are always substantial and scary events in Silver. Option volatilities midrates: Silver atm (at the money) 1 month 39.00 % 3 month 39.25 % 6 month 38.00 % 1 year 37.25 % ETF: 91 tonnes were added and the total holdings stand now at 14180 tonnes Support: 37.60 and 35.35 Resistance: 40.00 and 41.80 OUTLOOK: Bullish (hint of caution) Platinum: 1760 – up another $23 on the week. This is positive, but absolutely uninspiring as it takes all its impetus currently from Gold and Silver. They are the real and only drivers in the current environment. That will not change until the world wide economic situation improves substantially. ETF: down 10k on the week after last week’s up 12k. That really says it all. Support: 1735 and 1705 Resistance: 1790 and 1812 OUTLOOK: Neutral Palladium: 780 – Another 5 Dollars up on the week. The same comment is valid for Palladium as it is for Platinum. Palladium could become a bit livelier if it manages to regain and sustain the $800 level. Nothing to report until then. ETF: Down just over 20k on the week and nothing to be said Support: 750 and 730 Resistance: 800 and 818 OUTLOOK: Neutral

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