INTERNATIONAL. The January non-farm-payroll in the United States has been significantly better than expected. This has helped stock markets around the world to continue their excellent start into 2012. With 243,000 more people joining the ranks of the employed, the unemployment rate in the US has been pushed down to 8.3%.
This has raised concerns that the Federal Reserve Bank might have to start raising interest rates well before the recently published end of 2014. It also negates immediate expectations of the potential introduction of Quantitative Easing 3 (QE3), and these factors have triggered some profit taking in the precious metals sector, most notably in gold.
Gold: US$1,726.00 – down US$13 since last week.
Gold managed to rally up to US$1,763 on last Friday, just after the release of the non-farm-payroll numbers. Profit taking was the dominating factor for the remainder of the day, and prices went down to US$1,724, before closing near the lows of the day.
Some of the recently established longs have been liquidated, as Gold has rallied more than ten per cent since the beginning of the year. The physical markets have been relatively quiet last week, but we do expect some decent buying to be visible between US$1,700 and US$1,720. We have noted that many of our physical customers have actually redeemed a decent amount of Gold over the course of the last week.
Normally we expect to see sales against redemptions at a ratio of at least 15:1 but last week’s activities were on an equal level. Our interpretation is that customers have cashed in on a part of their holdings, having seen Gold in December down to US$1,540 level.
Option volatilities midrates : Gold atm (at the money)
1 month 18.00% up 0.50%
3 month 20.50% up 1.00%
6 month 22.30% up 0.80%
1 year 24.00% up 0.50%
EFP Spot Gold to April Comex: US$2.45
ETF: Holdings are at 2429 tons overall, an increase of 19 tons
Support: 1720 and 1682
Resistance : 1765 and 1788
Silver: US$33.65 – down US$0.25 since last week.
Silver had a good week and tried to overcome the resistance area around US$34.35. The attempt failed but the correction seen was nothing more than a little bit of profit taking towards the end of last week. Silver followed the lead of Gold and got caught in the selling after the release of the non-farm-payroll numbers.
The other white precious metals were not affected and held their levels, whilst Copper made good gains as a result of the improved economic outlook. These improved sentiments will help Silver over the course of the next few weeks, and we expect a further attempt to break the US $34.35 area and a test of the US $35 mark.
Option volatilities midrates : Silver atm (at the money)
1 month 39.00% up 2.50%
3 month 40.00% up 1.50%
6 month 41.00% up 1.00%
1 year 41.50% up 0.50%
EFP Spot Silver to March Comex: US $ minus 1 cent
ETF: Holdings are at 15050 tons, an increase of 100 tons in a single week!
Support: 33.00 and 32.03
Resistance : 34.35 and 35.00
Platinum: US$1620 – unchanged last week.
There are ongoing concerns about the current strike in South Africa. Impala Platinum fired 13,000 employees last week and the loss of production per strike day is worth 3,000 ozs Platinum, according to a statement from Impala.
Add to this the announcement from Eskom that power shortages will rise to 25 per cent of the total supply, plus the likely scenario that the market will slide into a supply deficit in 2012, and there are several reasons why Platinum has rallied recently so strongly.
It is fair to expect some difficulties to continued rallying from these levels as a lot of short positions have already been covered. The overall economic outlook does not look so bleak anymore, and this should help to consolidate the price around these current levels for a week or two.
Option volatilities midrates : Platinum atm (at the money)
1 month 21.00% down 0.50%
3 month 24.00% unchanged
6 month 25.50% unchanged
1 year 27.00% unchanged
EFP Spot Platinum loco Zuerich to April NYMEX: US$2.90
ETF: Holdings are at 46 tons.
Support: 1580 and 1550
Resistance : 1640 and 1664
Palladium: US$705 – up US$15 since last week.
Palladium is holding the current elevated levels well, and should be a winner in an overall improving world economic outlook. Palladium would gain more than Platinum from an improved outlook for the automotive industry because of their greater usage, especially in Diesel engines car exhausts, compared with Platinum.
All precious metals have had an excellent start into 2012, and the potential for Palladium could be extraordinary if the interest of the investment community could be revived.
Option volatilities midrates: Palladium atm (at the money)
1 month 31.00% down 3.00%
3 month 33.50% down 1.50%
6 month 35.00% down 1.50%
1 year 36.00% down 1.00%
EFP Spot Palladium loco Zuerich to March NYMEX: US$0.40
ETF: Holdings are at 56 tons.
Support: 681 and 644
Resistance : 730 and 757
Save the date: The Dubai Precious Metals Conference will take place on 29th and 30th April 2012. This conference is an initiative from the DMCC and organised by Foretell Business Solutions.
All the information about this important conference can be found on http://www.dpmc.ae/index.html