Special Features
Precious Metals Report
This has been a good week for most markets. The two votes on the austerity measures in Greece have been universally celebrated. The US economic figures have been pretty unconvincing recently and the ISM index data release from Friday rendered all of the recent negative data supposedly meaningless.The index rose from 53.5 to 55.3 instead of the expected drop down to the 52 level. This does signal expansion, higher stock holdings and a better economy in the 2nd half of 2011. I think it is also fair to assume that the Republicans and Democrats will eventually find ground for a deal on raising the debt ceiling level.
The Dow Jones finished the week up 648 points and that was the best gains it has achieved in two years. The Dollar still hasn`t made any gains yet as the week was EURO week. Nothing stands now in the way of releasing the next tranche of 12 BLN Euros to Greece, and the sigh of relief about this is loudest to Paris and Berlin. Just one last sentence on this issue: Greece and the other members of the Euro Currency Union bought themselves more time before they have to have another long hard look at what is going to happen next.
Italy, Portugal, Ireland and Spain are getting their house in order with quite stringent austerity measures themselves and that hopefully will reduce the possibility of contagion when the 12 BLN Euros have been spent in Greece.
It would be a political and economic masterstroke by the Governments, if they manage to heal the other potential candidates against failure, whilst they keep Greece in the limelight and on the drip-feed. After that all options concerning Europe would again be open without risking the whole Currency Union.
Precious Metals have fared the week reasonably well but Gold and Silver caved in on Friday. Platinum and Palladium are up on the week, but they had performed so badly over the last fortnight that this had to be expected as a sort of mini-clawback.
The ECB is expected to raise interest rates by 25 bps at their meeting on Thursday, and that is already firmly included in the Euro/US $ price. The US non-farm-payroll figures on Friday, 8th July will be the most anticipated economic figure release of the week and that could be another game changer in the short term.
Gold: 1486.50 – Gold is down 13.50 Dollars on the week. A relatively quiet week with limited moves between 1490 and 1515 until Friday, when money was taken off the table ahead of the long weekend in the US. The losses are to be explained with a risk happier approach of the investment community and also the slowing or reducing of geo-political tension in the MENA region. Bahrain, Tunisia are calm, Morocco has supported the King’s proposals in a referendum which leaves Syria and Libya as current flashpoints.
Gold might face another week of liquidation or at best limited investment activities. I do expect that we will see accelerated buying from India and other physical strongholds at these levels and all the way down towards 1450. I think it is important that the area of 1450 is going to be supported over the next couple of months before we can look forward to another rally. This rally will be borne out of physical and institutional demand for the remainder of the year.
Currency diversification is on most countries minds and recent history shows that a diversification from US$ into EUROs is not the answer. Currency or Asset baskets, including Gold, will do the trick and this will still be valid in the case of the freely exchangeable and freely floating Renminbi, whenever it will arrive. The Chinese PMI figures had been somewhat disappointing but not necessarily unexpected. The assumed slowdown in China did add to the pressure on Gold at the end of last week. The 100 day MA for Gold is at 1476 and that should add some decent support on the downside.
ETF levels unchanged and not worth writing about at this stage. Static at approx 68 Mio ounces without Friday’s potential redemptions.
Support: 1485 down to 1450
Resistance: 1521, 1528, 1542
OUTLOOK: Slightly bearish
Silver: 33.80 – Another 45 cents down on the week and the market does feel very tired. The trading ranges have somehow sort of "normalised" and that actually could well mean that the Silver interest is at an equilibrium at these prices above US$30. That would indeed be good news, and a slowdown in short term Option volatilities also points in this direction. The Option prices are still skewed towards the calls but more interest for protection on the downside has been the flavour of the day. This might be a good time for some mining companies to start focusing on budgets for 2012 and what Silver at these prices might mean for their projected cash flows in the future. The world economic outlook does not paint the rosiest picture for Silver, but the moves of the last 18 months show that this is only valid up to a certain point. Investor demand took over and the physical interest globally is still continuing unabated.
ETF: Just under 2 mio ounces redemptions in the week down to just over 452 Mio ounces overall.
Support: 32.30 and 33.30 Resistance: 35.50 and 36.80
OUTLOOK: Slightly bearish
Platinum: 1715 – 35 Dollars up on the week. Platinum has been able to stop the rot but this recovery has been done mostly through short covering of trade positions. We do expect a renewed test on the downside and 1690 is now the first level of support and 1665 if 1690 fails. The automotive industry seems to recover more quickly than expected but that will not change the course of the price in the short term. Investment and Industrial demand will ultimately prevail. The technical factors have changed from Neutral into a negative environment with further test on the downside to be expected.
ETF: Down 10k on the week to 1.370 mio ounces
Support: strong 1660 and 1638
Resistance: 1780 and 1810
OUTLOOK: Slightly bearish
Palladium: 755 – 25 Dollars up on the week. The same reasoning applies for Palladium as for Platinum. "Short covering" of the professional trade. A negative sign is that Palladium is trading now below the 100 day MA and we would expect the downside to be tested next week. We do see support initially at 730 but major support now at 705.
ETF: tiny activities last week with smallish redemptions down to 2.1 mio ounces
Support: 730 and 70r Resistance: 775 and 788
OUTLOOK: Slightly bearish
