Precious Metals Weekly Report by Gerhard Schubert, Emirates NBD



Precious Metals Report by Gerhard Schubert, Head of Precious Metals, Emirates NBD

Save the date: The 8th Dubai-City of Gold Conference will take place on the November 13, 2011. Organised by the Dubai Gold and Jewellery Group (DGJG), the conference will be held at the Almas Tower, which has been made available for the event by the Dubai Multi Commodities Centre (DMCC).

An amazing week is behind us and we can look forward to much of the same. Gold reached a new all-time high of 1912 and tanked down to 1703 within 36 hours. The recovery from this correction, and this is all it was, is on its way as Gold closes the week at 1828. The US GDP number of one per cent came out weaker than expected, but it was still received as reasonable as some analysts had feared it to be half of that one per cent. The much anticipated speech from FED Chairman Bernanke in Jackson Hole was sort of a non- event as he reiterated that the Fed has more tools in their toolbox without specifying anything in particular. The next Fed meeting in September has been extended to a two-day one and might give some more clues about any potential action from the FED. The financial health of some peripheral Eurozone countries is still worsening and this is supportive for the outlook for Gold. The European Equity markets are under immense pressure and the German DAX seems to be the main focus at the moment as it is the only one of the major European indexes which haven’t restricted short selling as of yet.

Gold: 1828.00 – down $24 on the week and that is still an overall incredible performance. Gold moved up to $1912 and then down to $1755 on the same day, only to drop the next day further down to $1703 before regaining some composure.

The violent washout has cleaned out a lot of the weak longs and this correction was necessary and expected. We have seen unabated buying from our physical customer base during the whole week, and it has easily been our most successful week in terms of physical offtake. The interest was definitely not limited to the lower prices after the correction but it was simply present at all times and at all prices. The UK is celebrating August Bank Holiday tomorrow and it is doubtful if the open outcry session on Comex will be able to open on Monday in New York City due to Hurricane Irene. We are expecting Gold to continue its march towards $2000 and we are looking at these corrections as a buying opportunity.

Option volatilities midrates: Gold atm

1 month  29.50 %   up  2.50 %

3 month  28.00 %  up 0.50 %

6 month  27.00 % down 0.50 %

1 year       26.75 % down 0.25 %


ETF: Holdings are down by approx 50 tonnes to 2250 tonnes overall

  • Support: 1703 and 1685
  • Resistance: 1835 and 1888

OUTLOOK: Bullish

Silver: 41.35 – down $1.55 on the week. Silver rallied to a high above $44 during the week, even if only very briefly. What followed was the dive down to $38.85 and the consolidation towards the end of the week to close above $41.00. Silver trading guarantees major swings as clearly visible a few lines below at the strength of the Option volatility rates. Our outlook for Silver is positive and we expect the uptrend to continue. Our short term expectation is to regain the $44 mark and to make a very credible push towards $50 before the end of the year.

Option volatilities midrates: Silver atm (at the money)

1 month  47.50 % up 4.00 %

3 month 45.50 % up 3.50 %

6 month 44.75 % up 3.25 %

1 year 43.75 % up 2.75 %

ETF: The total holdings are up slightly to 14510 tonnes

  • Support: 38.80
  • Resistance: 42.50 and 43.82

OUTLOOK: Bullish

Platinum: 1832 – down $43 on the week. Platinum did keep the upper hand in the battle with Gold for price supremacy and this battle is looking to continue next week. The ratio to Gold is the main focus and it was at par on the high at $1910 and that widened to $70 during the heavy correction in Gold. Ultimately, I still expect Platinum to be the loser of this fight and Platinum to trade substantially below the Gold price. The price target on the downside would be $1725.

Option volatilities midrates: Platinum atm (at the money)

1 month 21.00 % up 2.00 %

3 month  23.00 % up 1.00 %

6 month  24.25 % up 0.50 %

1 year       25.75 % up 0.75 %

ETF: Holdings are up at 49 tonnes

  • Support: 1780
  • Resistance: 1850 and 1890

OUTLOOK: Neutral

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