Silver rally by no means over, could rise to US$100 - Dubai Precious Metals Conference
Source: Precious Metals, Emirates NBD , Author: Gerhard Schubert
Posted: Sun May 6, 2012 12:49 am

UAE. The latest US non-farm-payroll figures were released and 115,000 new Jobs have been created. The unemployment head line rate has been reduced to 8.1%. These numbers have been interpreted as disappointing, as the median expectation was looking for the creation of approx. 160,000 jobs.

Standard & Poor’s raised the rating for Greek bonds to CCC. The Greek population is going to vote on Sunday, 6th May, in a general election, and the world looks nervously to Athens.

The presidential election in France will also be decided on Sunday, 6th May. The result might have ramifications for the Euro and obviously also for Euro/Gold. It will be interesting to see if the Eurozone will have a continuation of the “Merkozy” period, or if we will look at a new “Merllande” constellation.

Australia lowered its growth forecast for 2012 to 3% from 3.5%. Australia’s economy is very much a resource exporting economy, and the global economy seems to be slowing down.

The Shanghai Futures Exchange will start with the trading of Silver futures contracts on the 10th May. The CME introduces changes into the way they measure margin requirements, which seems to make the holding of positions for speculators more expensive.

Gold: US$1,643.00 – down US$19 from last week.
The Commitment of Traders Report (COTR) shows an increase of long positions and a reduction of short positions. Gold drifted lower all week long, which culminated in a test of the support area around US$1625 before rallying and closing in the US$1640’s.

Gold has risen against the Euro as the results of the Greek and French elections are expected. There seems to be plenty of scope for uncertainty resulting out of the proceedings in the Eurozone. All “white” industrial precious metals have given up a lot of ground, with the premium for Gold over platinum rising to US$120. This can easily be interpreted as political risk premium paid for gold over the diminishing prospects for the world economy.

Option volatilities midrates: Gold atm (at the money)
1 month 13.50% unchanged
3 month 15.50% unchanged
6 month 18.00% unchanged
1 year 19.70% up 0.30% Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$0.50
EFP Spot Gold to June Comex: US$0.30
ETF Holdings are at 2498 tons
Support: 1625 and 1611
Resistance: 1669 and 1700

Silver: US$30.35 – down US$0.87 from last week.
Silver tried and succeeded in breaking the US$30 level. Silver went down to the US$29.70 level before some short covering lifted the price up to the week’s closing level at US$30.35. A small amount of Silver short positions as well as long positions have been covered during last week, according to the Commitment of Traders Report (COTR).

The Dubai Precious Metals Conference last week spent a lot of time discussing if the silver bubble had burst. The resulting poll showed that the audience believed more strongly that the rally is by no means over, and that silver could rise to US$100, according to Ross Norman, CEO of Sharps Pixley, in the not too distant future.

Option volatilities midrates: Silver atm (at the money)
1 month 25.50% unchanged
3 month 27.50% down 1.00%
6 month 30.00% unchanged
1 year 31.00% unchanged
EFP Spot Silver to July Comex: US $ minus 0.5 cents
ETF: Holdings are at 14994 tons
Support: 29.40 and 28.70
Resistance: 32.00 and 32.80

Platinum: US$1523 – down US$44 from last week.
The discount to Gold has increased to US$120. According to the Commitment of Traders Report (COTR), long positions have increased slightly while there have been some minor reductions of short positions. Platinum did finally move under the support level of US$1,540, and closed significantly below that level for the week. The global economic situation looks a little bleaker and there was no encouragement from the latest US unemployment data for platinum.

A move below the next support level at US$1500 would change the technical outlook to bearish, with potentially US$1400 as the next target. It was argued, during last week’s Dubai Precious Metals Conference that prices under US$1500 are not sustainable for the platinum producers. Firstly, markets rarely take note about producer prices, and secondly, the answer for the platinum producer could be in a potential weakening of the South African Rand, as the costs are in Rand terms. There was also talk about substantial surplus material for 2012, which also blights the outlook for platinum prices.

Option volatilities midrates: Platinum atm (at the money)
1 month 16.75% down 0.75%
3 month 20.00% down 0.50%
6 month 22.00% unchanged
1 year 24.00% unchanged
EFP Spot Platinum loco Zurich to July NYMEX: US$1.00
ETF: Holdings are at 47 tons.
Support: 1500 and 1465
Resistance: 1585 and 1600

Palladium: US$648 – down US$31 from last week.
Palladium tested the short-term support at US$650 last Friday, and closed the week just under this important level.
Nevertheless, I still leave the first support marker at US$650 intact, as I seek confirmation for a decisive break of that level on Monday. The latest COTR report shows a small increase in long positions, while some short positions have been liquidated.

The ETF holdings have gone up again last week, and it seems that investors are reducing future contracts, but still accelerating investment in the ETF’s. The economic slowdown and challenges seem to have finally caught up with the resilience shown by Palladium.

Option volatilities midrates: Palladium atm (at the money)
1 month 21.50% down 2.50%
3 month 24.50% down 2.50%
6 month 27.50% down 2.50%
1 year 31.00% down 1.00%
EFP Spot Palladium loco Zurich to June NYMEX: US$0.00
ETF: Holdings are at 64 tons
Support: 650 and 627
Resistance: 695 and 717

In conclusion, I would like to say THANK YOU to all the participants of the inaugural Dubai Precious Metals Conference, and special thanks to the DMCC and Foretell Business Solutions for organizing a great conference. The date for next year’s Dubai Precious Metals Conference 2013 has been confirmed for the 7th and 8th April 2013.

Note: This is the Precious Metals Report for May 5, 2012 by Gerhard Schubert, Head of Precious Metals at Emirates NBD.

About Emirates NBD
Emirates NBD (DFM: Emirates NBD) is a leading bank in the region. Emirates NBD have a leading retail banking franchise in the UAE, with 132 branches, 705 ATMs and SDMs. It is a major player in the UAE corporate banking arena, and has a strong Islamic banking, investment banking, private banking, asset management and brokerage operations.

The bank has operations in the UAE, the Kingdom of Saudi Arabia, Qatar, the United Kingdom and Jersey (Channel Islands), and representative offices in India, Iran and Singapore.

For more information about Emirates NBD, please visit

Disclaimer: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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