Precious Metals Report
29th September2013
US
The weekly jobless claims fellby 5,000 to 305,000, down from a revised figure of 310,000 for the
previous week. This number is now accurate, as the remaining 2 states have cleared their
backlog.
The yield on the US 10-year Treasury benchmark finished the week at 2.62 per cent.
Pending home sales fell by 1.6 per cent in August, after a revised drop of 1.4 per cent in July.
The growth of GDP has been confirmed at 2.5 per cent annualized, to be in line with the forecast.
Personal income rose in August by 0.4 per cent.
The University of Michigan consumer confidence index fell in September to 77.5, down from a
reading of 82.1 in August.
Japan /China / India / South Africa
The Reserve Bank of India (RBI) is going to use the CPI figure as their main guide for monetary
policies. This shift signals potentially more interest rate rises in the near future.
The Indian Rupee finished theweek at 62.45to the US dollar.
Japanese consumer prices rose in August by 0.8 per cent, compared with the same month in
2012.
Japanese Prime Minister Abe declared the state of the Japanese economy as “exceptionally
good”
China is envisaging a trial convertibility of the Yuan within a designated Free-Zone in Shanghai.
Mine workers at the South African mining company Amplats are striking over a planned 4,800 job
cuts. Amplats is the world’s largest producer of Platinum.
Europe
The consumer confidence in the Eurozone rose in September to 96.9, up from a revised reading
of 95.3 in August.
The Governor of the Bank of England, Mark Carney, sees no reason for an increase of the
existing stimulus programme.
The Italian government is expected to vote this week on the possible expulsion of former Prime
Minister Berlusconi, amid threats from his party to withdraw their support for the governing
coalition.
Gold: US$ 1336.50–up US$ 11.00 from last week
Last week’s trading can easily be described as dull and uninspired. There were small flurries
of activities last Wednesday, due to Comex option expiry and Friday’s little rally to close the
week in the higher US $ 1330’s. Gold traded around the US $ 1325 level for the rest of the
week.
It appears that the small rally seen last Friday is partially already a symptom for slightly
increased nervousness, due to the deadlock in the US concerning the funding of the budget.
A government shutdown appears now likely, which is not helpful but it is not a dramatic event
either. A potential failure to increase the debt ceiling by the mid October would be a much
more damaging turn of events. The game of brinkmanship in these matters might go close to
the wire and that will be supportive for gold, at least in the short term.
The main event this week will be the release of the Non-Farm-Payroll numbers on Friday,
should theBureau of Labor Statistics decide that it deemed to be part of the “orderly
cessation of activities”, in the case of a government shutdown.
The President of the New York Federal Reserve Bank, William Dudley, said that the potential
government shutdown and the wrangling about the debt ceiling are also part of the reason
why the Fed has decided against an early tapering of QE3. More data need to be collected
and more momentum needs to be seen before tapering will start, according to William
Dudley.
However, the gold market appears to be extremely sensitive about all speeches, murmurs
and rumours about the beginning of tapering the stimulus programme. It is going to happen,
maybe at the upcoming FOMC meeting on 29th and 30th October, but most likely in the
FOMC December meeting.
I have left the following sentence from last week’s report intentionally, as there is no reason
to change anything and it is absolutely valid, at least in my view.
Gold is currently in no-man’s land and there appears to be no need for fresh buying,
unless the market is able to break the major resistance level at US $ 1425.
However, we still recommend that gold should represent between 2 and 5 per cent
within a prudently managed investment portfolio, due to its mostly negative
correlation with other asset classes.
The latest COTR (end of business day 24th September2013)shows avery small increase of
long positions, amid a decreaseofshort positions.
Option volatilities midrates
Gold
atm (at the money)
1 month
3 month
6 month
1 year
19.25%
19.25%
19.25%
19.50%
Change from last week
unchanged
unchanged
unchanged
unchanged
Premium 1kg Gold bars loco Dubai (DGD 995 fine) against loco London: US$ 0.25
EFP Spot Gold to December Comex: US$ 0.20
ETF: Holdings are at 1935 tons, unchanged from last week.
Support: US$ 1305 and US$ 1285 Resistance: US$ 1350and US$ 1380
Silver: US$ 21.77 – unchangedfrom last week
Silver finished the week unchanged and that basically says it all. The whole week was very
subdued and trading was done on very much lower volumes than usual.
The reduction of long positions in this week’s COTR could be interpreted as an increase of
doubt that the downside for silver prices is already history. Short positions haven’t increased,
while the ETF holdings have risen by 131 tons. This makes for a diverse and confusing
picture without a clear cut direction. What this naturally means is, that silver will take, as
usual, its cue from the gold market for the next move.
The latest COTR (end of business day 24th September 2013)shows a further reduction of long positions,
amid a nearly unchanged number of short positions.
Option volatilities midrates
Silver
atm (at the money)
Change from last week
1 month
3 month
6 month
1 year
32.50%
32.00%
31.00%
30.50%
Down1.00%
Down1.00%
Down 1.25%
Down 1.25%
EFP Spot Silver to DecemberComex: US$ 1.75 cents
ETF: Holdings are at 20,056 tons, up131 tons from last week.
Support: US$ 21.08 and US$ 20.80Resistance: US$ 22.40 and US$ 23.15
Platinum: US$ 1418 – downUS$ 12from last week.
Platinum prices are still at an US $ 80 premium to gold, but it failed to close at least in
unchanged territory.
Platinum miners at Amplats operations in South Africa have downed the tools and walked
out on strike, against the proposed 4,800 job cuts. These job cuts appear necessary in order
to save most of the other 45,000 jobs at Amplats, according to the management. The
Association of Mineworkers and Construction Union (AMCU) plans the strike to last an initial
48 hours, but more strikes und tensions over wage demands can be expected.
Both sides in this wage negotiations seems far apart, but that does not mean that much,
compared to what we have seen at the swift resolution in the gold mining sector. However, it
is, in my view, significant and disappointing that platinum prices could not muster any kind of
a rally on this development.
The overriding concern for the state of the global economy in general and the US economy
in particular could be, that the uncertainty over the US fiscal fights outweigh any other
consideration for the time being.
The latest COTR (end of business day 24th September 2013)shows an increase of long positions, amid
anequal increase of short positions, which neutralises each other, meaning net position remaining
unchanged.
Option volatilities midrates
Platinum
atm (at the money)
1 month
3 month
6 month
1 year
19.50%
20.50%
21.50%
22.50%
Change from last week
unchanged
unchanged
Up 0.25%
Up 0.50%
EFP Spot Platinum loco London to January NYMEX: US$ 2.00
ETF: Holdings are at 70.5 tons, up0.5 tons from last week.
Support: US$ 1400and US$ 1390 Resistance: US$ 1450 and US$ 1480
Palladium: US$ 728 – upUS$ 13 from last week.
Palladium, again,gained over the course of last week’s proceedings and the outlook does
look comfortable and healthy.
The budget and fiscal debate in the US might be a little dampener on the overall perception
of the economy, but palladium prices have shown consistent progress amid a lack of selling.
Last week’s trading saw “normal” patterns of interest from the investment community and
also from some members of the industrial user community, while the selling seen was not
enough to stop the prices from drifting higher.
The price rises do not represent a rush or sudden speculative rally, but it appears to be
fundamentally driven and sound. The market can easily be described as long, but not yet in
overbought territory.
The latest COTR (end of business day 24th September2013) shows aincrease of long positions, and a
reduction of short positions.
Option volatilities midrates
Palladium
atm (at the money)
Change from last week
1 month
3 month
6 month
1 year
22.00%
23.25%
25.00%
26.50%
unchanged
unchanged
unchanged
unchanged
EFP Spot Palladium loco London to December NYMEX: US$ 0.35
ETF: Holdings are at 69.2tons, up 0.1 tons from last week.
Support: US$ 715 and US$ 690
Gerhard Schubert
Resistance: US$ 740 and US$ 755
Head of Commodities,
Emirates NBD,
Private Banking,
Baniyas Road
5th Floor.
P.O. BOX 777,
Dubai UAE.
Tel: +9714 6093346
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