A fiscal treaty about budget discipline has been signed by 25 of the 27 Eurozone countries, and only 12 countries need to ratify this treaty in order for it to become binding for all signature members.
This is the first week in a long time that Greece has not been one of the main talking points in this report as well as in the market headlines. The precious metals world was very much caught by something that wasn’t said, instead of a specific statement. The Federal Reserve Chairman, Mr. Bernanke’s statement on February 29 did not mention QE3 (Quantitative Easing) and that led to a massive sell-off for Gold and Silver. Against this scenario, Platinum and Palladium fared a lot better than Gold, with Silver also recovering nicely as it benefitted from its “industrial” precious metals status.
Gold: US$1712.00 – down US$60 since last week. Last week started well for Gold with the market trading between US$1761.50 and 1780. The market traded higher on Wednesday and reached levels just shy of US$1790 before Mr. Bernanke’s statement. The trading community’s disappointment about Mr. Bernanke not mentioning the possibility of deploying more quantitative easing led to a dramatic sell-off. Several million ounces were sold within minutes as speculative longs and algorithmic traders run towards the exit door. Gold dropped US$100 as a result and some major damage has been done. The prices have recovered some ground on Thursday and Friday, but Wednesday was looking like, what can be described as a “key reversal” day. This describes a situation whereby a price registers a new contract high and then manages to close below the previous day’s low. This has not entirely been the case, as the April Gold contract has registered highs last year around US$1925, but this time April Gold was the actual traded active month.
Nevertheless, concerns about the speculative nature of the recent move higher have been proven correct, and the physical and derivative buying on Thursday was the best since December 19, 2011. All the redemption seen during January and February have been forgotten as the buying on the low US$1700’s has been excellent. It shows that the customer base is well informed, and this return of physical buying has been the missing ingredient for the last couple of months.
Option volatilities midrates: Gold atm (at the money)
1 month 17.00% up 0.25%
3 month 17.50% down 1.00%
6 month 19.50% down 0.75%
1 year 21.50% down 0.50%
EFP Spot Gold to April Comex: US $ 0.80
ETF: Holdings are at 2488 tons overall, an increase of 13 tons
Support: 1701 and 1688 Resistance: 1740 and 1754
Silver: US$34.70 – down US$0.65 since last week. Silver rallied early in the week towards the US$35.70 level without being able to overcome this level. The Gold led the sell-off on Wednesday and was accompanied by a five per cent drop in silver prices, but silver prices have since recovered well and traded towards the end of the week between US$34.60 and US$35.10. The physical silver buying has been encouraging and the
more positive world economic development has helped the fundamental outlook for silver. The spike in the nearby one and three month column for option volatilities demonstrates the growing requirement of the market participants for short term “insurance” plays.
Option volatilities midrates: Silver atm (at the money)
1 month 35.00 % up 5.00 %
3 month 35.50 % up 2.25 %
6 month 36.00 % unchanged
1 year 37.25 % unchanged
EFP Spot Silver to May Comex: US$4 cents
ETF: Holdings are at 15220 tons, an increase of 135 tons
Support: 34.32 and 33.45 Resistance : 36.60 and 37.80
Platinum: US$1694 – down US$13 since last week. The discount to Gold has been nearly fully eroded and stands now at just US$20. The major resistance area of US$1740 is still intact and that will provide quite a strong barrier for the moment. Impala has announced that the re-hiring and training of staff has been completed and that the production is expected to start again on Monday. It will still take time before full “pre-strike” level production will be achieved, but the premium paid for Platinum prices through this strike action will lose its basis and that could also slow down the price movements.
Option volatilities midrates: Platinum atm (at the money)
1 month 19.75% up 0.25%
3 month 22.50% up 0.50%
6 month 24.00% unchanged
1 year 25.50% unchanged
EFP Spot Platinum loco Zurich to April NYMEX: US $ 2.00
ETF: Holdings are now at 48 tons.
Support: 1685 and 1652 Resistance : 1740 and 1767
Palladium: US$710 – up US$2 since last week. Palladium is up on the week and that is an achievement in itself. Palladium is expected to be the main benefactor from an improving outlook for the automotive industry. This might be the case with the outlook for the US car sector but the figures from mainland China have been less encouraging. Palladium has built a strong price base in the low US$600’s and that should help to put a bottom in place for the foreseeable future, whilst the upside is more difficult to determine with still too many macro-economic issues to be resolved.
Option volatilities midrates: Palladium atm (at the money)
1 month 26.00% down 0.50%
3 month 30.50% down 0.50%
6 month 33.00% unchanged
1 year 35.00% unchanged
EFP Spot Palladium loco Zurich to June NYMEX: US$1.60
ETF: Holdings have increased by another 1 ton to 60 tons
Support: 675 and 656 Resistance: 740 and 768
Emirates NBD is proud to announce that it will be serving as the Title Sponsor of the upcoming Dubai Precious Metals Conference, together with Standard Bank. An initiative from the DMCC, and organised by Foretell Business Solutions, the Dubai Precious Metals Conferencde will take place from April 29 – 30, 2012. All the information about this important conference can be found on http://www.dpmc.ae/index.html
