Gold builds strong base above US$1,600 - Emirates NBD report
Source: Precious Metals, Emirates NBD , Author: Gerhard Schubert
Posted: Sun April 15, 2012 8:29 pm

UAE. It was the expected slow start into last week, with many countries still out for the Easter holiday, and the market returned fully only on Tuesday. The implications from the negative US non-farm-payroll figures was already absorbed and digested by the time the markets returned.

Developments in Spain have been among the major focus during last week with the yield for Spanish bonds rising up to the six per cent mark, and closing shy of that level for the weekend. The broad difficulties of the Spanish economy and austerity measures are so well publicised, that it is baffling where these sudden “surprises” in the mind of the investment community are coming from. Could this already be the arrival, or what we have to look forward to, of the “summer lethargy?”

Gold: US$1,658.00 – up US$20 from last week. Gold has tried to test the US$1,680 level to the upside and failed. This does sound negative but gold was the positive surprise last week. The Commitment of Traders Report (COTR) showed that further reductions of long positions have taken place, whilst short positions have been increased.

There was some expectancy that gold prices could take a dip towards the US$1580 levels. Whilst this cannot be excluded, the proceedings of last week have shown that gold has already built a strong base above the US$1600 level. The strike of the Indian Jewellery companies has also ended, which should help to support the prices, especially as the Akshaya Tritiya festival is approaching (24th April). It might be a good show if gold prices can further consolidate above the US$1630 level.

The problem with gold seems to be, that it is very unclear which association (risk on, risk off, safe haven) it is following at the moment. The Spanish situation was a major talking point last week and we do expect this to continue.

Option volatilities midrates: Gold atm (at the money)
1 month 17.00% up 1.00%
3 month 18.00% up 0.75%
6 month 19.50% up 1.00%
1 year 21.00% up 1.00%
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$0.60
EFP Spot Gold to June Comex: US$0.95
ETF: Holdings are at 2520 tons
Support: 1611 and 1588
Resistance: 1682 and 1705

Silver: US$31.50 – down US$0.22 from last week.
Silver has shown some level of independence from gold price movements, but this was not necessarily good news. Silver prices were unable to stage any kind of rally until gold did approach the US$1680 level. Silver managed to get above US$32 on the back of this move, but silver was unable to hold that level.

Silver prices have been under pressure as the economic slowdown hurts the industrial precious metals. The support at US$31.10 has held so far and it can be expected that silver might takes its cue for the price development next week from the base metal segment, like copper for instance.

Option volatilities midrates: Silver atm (at the money)
1 month 31.00% up 0.50%
3 month 32.00% up 0.50%
6 month 32.50% up 0.50%
1 year 33.00% unchanged
EFP Spot Silver to May Comex: US $ minus 2.00 cent
ETF: Holdings are at 15085 tons
Support: 31.10 and 30.40
Resistance: 33.00 and 33.52

Platinum: US$1582 – down US$18 from last week. Platinum was sold down last week. More long positions have been liquidated and some more short positions have been added, according to the latest Commitment of Traders Report (COTR).

This has to be seen in the wider context of industrial metals, like for example copper, getting sold because of the worldwide economic slowdown. Platinum is still holding the support level at US$1580 but a break could see some more stop loss selling aiming at a test of the US$1530 to US$1540 area. The discount from platinum to gold has widened again to approx. US$75.

Option volatilities midrates: Platinum atm (at the money)
1 month 17.50% unchanged
3 month 20.50% unchanged
6 month 22.00% unchanged
1 year 24.00% unchanged
EFP Spot Platinum loco Zurich to July NYMEX: US $ 2.25 ETF: Holdings are at 48 tons.
Support: 1580 and 1540
Resistance: 1650 and 1700

Palladium: US$640 – unchanged from last week.
Palladium has done well to keep the price level unchanged over the course of last week. This is especially encouraging when most base metals as well as platinum have been under pressure last week. The latest COTR report also shows that the investment community has further reduced long positions and new shorts have been established.
However, the overall interest can easily be described as lethargic.

Option volatilities midrates: Palladium atm (at the money)
1 month 24.00% unchanged
3 month 26.00% unchanged
6 month 29.00% unchanged
1 year 32.00% unchanged
EFP Spot Palladium loco Zurich to June NYMEX: US $0.30
ETF: Holdings are at 62 tons Support: 627 and 600 Resistance: 665 and 690

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

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MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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