UAE. The Precious Metals continue to trade in much enlarged trading ranges, but they have held important levels and have consolidated reasonably well.
The industrial Precious Metals were the biggest losers in the early part of the week as more uncertainties over the state of the Chinese economy came to the surface.
China itself was closed last week because of “Golden Week” and the markets will find out next week about the level of physical support for Precious Metals.
There have been “not so bad” non-farm-payrolls on Friday with 103 thousand newly created jobs, but the overall unemployment rate still stands at 9.1% in the US.
Some murmurs about a plan to deal with the Sovereign Debt issues in Europe in general and with Greece in particular, seem to gain some credibility. One of the rating agencies (Fitch) have downgraded Italian and Spanish debt on Friday based on fear of intensifying of the Sovereign Debt crisis. These issues will still provide ultimately support for the Gold price in the near future.
Gold: US1638.00 – up US$14.50 on the week. Gold did pretty well over the course of last week. The premium of Gold against Platinum rallied to a high of US$185 at its best and this is unprecedented in the course of the last 20 years.
Gold traded to a low of US$1600 and has held this important level again very comfortably.
Speculative positions on Comex are at their lowest level since early 2008, and there are even short positions out there now. All this bodes very well for a short covering rally, supported by decent physical buying between now and the end of the year. US$1900 to US$2000 should still be the target for this year.
Option volatilities midrates: Gold atm
1 month 31.00% down 2.00%
3 month 31.00% unchanged
6 month 30.75 % unchanged
1 year 30.50 % unchanged
EFP (Exchange for physical) midrate: Gold spot to December Comex: US$1.50
ETF: Holdings stand currently at 2319 tons overall
Support: 1580 and 1537 Resistance: 1680 and 1706
Silver: 31.15 – up US$1.25 on the week.
Silver moved down to US$28.50 on October 5th only to rally to US$32.80 on Friday, October7th. That’s a 15.2% move from the low of the week to the highs of the week within less than 48 hours. The volatilities below, clearly demonstrate the challenge out there for investors in this very active market.
The long liquidation in the Futures market has not been visible in the ETF numbers as these have actually risen quite substantially last week. I suspect that Silver has changed into stronger hands with potentially longer time horizons for their investment.
We still expect Silver to be the main beneficiary from a sustained rally in Gold towards the end of the year.
Option volatilities midrates: Silver atm (at the money)
1 month 66.00% down 3.00%
3 month 58.00% unchanged
6 month 54.00% up 2.00%
1 year 49.50% up 2.00%
EFP: (Exchange for physical) midrate: Silver spot to Dec Comex: 0.7 US cent
ETF: The total holdings are now 14970 tonnes
Support: 28.43 and 26.12 Resistance: 33.50 and 35.00
Platinum: 1488 – down US$34 on the week. Platinum has been the big loser of the week as the price dived down to US$1435 at some stage.
The discount to Gold did widen to US$185 only to close the week on Friday at US$150 discount. The well documented worries about the Chinese economy and especially about the automotive industry are driving the Platinum price and that is why we are expecting the prices to stay on the defensive.
The very sizeable discount to Gold has been accelerated through stop-loss position liquidating from professional market participants. I am convinced that going long Platinum and short Gold at discounts of around US$200 per ounce will turn out to be profitable, but you might have to hold this trade for a while until the outlook of the world economy improves significantly.
Option volatilities midrates: Platinum atm (at the money)
1 month 34.00% up 6.00%
3 month 32.00% up 4.00%
6 month 31.50% up 3.50%
1 year 30.00% up 2.00%
ETF: Holdings are down just under 1 ton to now 46.8 tons.
Support: 1432 and 1370 Resistance: 1538 and 1580
Palladium: 587 – down US$22 for the week. Palladium made new lows at US$538 for the year but did recover very valiantly towards Friday. Unfortunately, the rally back above 600 could not be confirmed and the prices came again under renewed pressure on Friday evening.
Chinese markets will reopen on Monday and some support is expected, but the worries about the economy will represent the main driver in the new week. We expect the lows to be re-tested in the next few weeks
Option volatilities midrates: Palladium atm (at the money)
1 month 40.00% up 5.50%
3 month 37.50% up 3.50%
6 month 36.00% up 2.25%
1 year 35.00% up 1.50%
ETF: Holdings are down 2 tons at 59 tons in total.
Support: 538 and 500 Resistance: 632 and 684