UAE. Emirates NBD, the United Arab Emirates biggest lender by assets, today released the latest weekly Precious Metals Report.
Spain and Cyprus have been downgraded by Moody`s; The Spanish 10-year bond yield rose on Thursday briefly to seven per cent; Moody`s cut the ratings of five dutch banks; The Indian rupee finished the week at 55.50.
Gold US$ 1627.50 – up US$ 34.00 from last week
The Commitment of Traders Report (COTR) for the week ending Tuesday, 29th May 2012, shows a small reduction of long positions, and a significant reduction of short positions. These figures are from close of business, Tuesday, 5th June 2012 and it has to be expected that more short positions have been covered in anticipation of next week`s proceedings.
Gold did well last week, with the US$1,600 level not seriously being tested and gold drifting higher on short covering. Please, make no mistake, the results from the Greek election and the meetings taking place next week, of the G20, the FOMC and the Euro Finance ministers will influence the gold price crucially for the near term.
So much has been spoken and printed about the possible scenario that I refrain from outlining them here, but I firmly expect volatility to be rising and the gold price to be moving very wildly next week. Just one word of caution: Gold might plunge significantly first, before eventually rallying in case of a potential Greek exit from the Euro.
A lot of investors might sell gold because they can, and they might need the liquidity, in order to fill gaps in other asset classes. These potential see-saw moves might be vicious and on a very sizeable scale.
Option volatilities midrates:
Gold atm (at the money)
1 month 20.50% up 1.00%
3 month 22.00% up 1.00%
6 month 23.50% up 0.75%
1 year 25.50% up 0.75% Premium
1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$ 0.65
EFP Spot Gold to August Comex: US$ 0.70
ETF: Holdings are at 2510 tons
Support: 1580 and 1525
Resistance: 1640 and 1665
Silver US$ 28.67 – up US$ 0.17 from last week
The Commitment of Traders Report (COTR) shows a reduction in existing long positions and also a reduction in short positions. Last week`s price movements can be described as boring, as no new ideas or willingness to rally became visible from the trade.
Everything will be changing and the market will be in a very different mind-set, come next week and beyond.
Option volatilities midrates : Silver atm (at the money)
1 month 34.00% up 1.50%
3 month 35.50% up 1.50%
6 month 36.00% up 1.00%
1 year 37.00% up 1.00%
EFP Spot Silver to July Comex: US$ minus 6.00 cents
ETF: Holdings are at 15110 tons
Support: 27.25 and 26.77
Resistance: 30.00 and 31.50
Platinum US$1478 – up US$48 from last week
The discount to Gold has decreased to US$150. According to the Commitment of Traders Report (COTR), new long positions have been established, whilst a decrease of short positions have also been monitored.
Some short covering has taken place and this move accelerated towards the end of the week. It appears that US$ 1400 is the line in the sand and that the speed of the move up, was simply an expression of the size of the existing short positions.
The automotive industry related sales figures were neutral, but the uncertainty concerning the wider economic picture and the political impact of the Greek election led to some strong buying last week.
Everything will have to be re-evaluated after all these important meetings next week (G20 meeting, Euro Finance minister meeting, FOMC meeting and of course Greek election results).
Option volatilities midrates : Platinum atm (at the money)
1 month 23.00% up 1.50%
3 month 24.00% unchanged
6 month 24.50% unchanged
1 year 26.00% up 0.50%
EFP Spot Platinum loco Zurich to July NYMEX: US$ minus 1.50
ETF: Holdings are at 46 tons.
Support: 1400 and 1385
Resistance: 1500 and 1550
Palladium US$ 625 – up US$ 12 from last week
The latest COTR report shows that both, new long positions, as well as a reduction of short positions were smallish. All the reasons mentioned for
platinum also apply for palladium, but the palladium short covering rally was smaller than the one seen in platinum. The existing short positions in platinum are significantly higher than in palladium and that explains why the move in palladium is considered to be more sedate.
I expect that next week`s proceedings will be guided by news headline trading and that increased volatility will be the main driver for the market movements.
Option volatilities midrates: Palladium atm (at the money)
1 month 26.00% unchanged
3 month 27.00% unchanged
6 month 28.25% unchanged
1 year 31.00% unchanged
EFP Spot Palladium loco Zurich to September NYMEX: US$ 0.30
ETF: Holdings are at 64 tons
Support: 595 and 580
Resistance: 650 and 662