Precious Metals Report
Europe:
• The Spanish 10-year bond yield closed the week at 5.25 per cent.
• The Italian 10-year bond yield closed the week at 4.47 per cent.
• The Italian Parliament passed the budget for 2013 with a large majority. Prime Minister Mario Monti has resigned and an election has to be called within 75 days. The 24th February 2013 is, according to analysts, the most likely date for the ballot.
• Cyprus has been downgraded by Standard & Poor`s to CCC+, down from B. There are on-going negotiations between the Eurozone, the IMF and the Cypriot government, about their bail-out request to the tune of 17 Billion Euros. Russian President Vladimir Putin has indicated that Russia would consider joining the bail-out, if the Eurozone and the IMF settle their differences with Cyprus. Cyprus is expected to run out of money latest by February 2013.
US:
• Consumer confidence fell to 72.9 in December, down from 82.7 in November.
• Home sales rose in November by 5.9 per cent.
• The GDP figure for the third quarter was revised upwards from 2.7 per cent to 3.1 per cent. The economy grew stronger than anticipated but expectations for the fourth quarter figure will include the effect of Hurricane “Sandy”, as well as the growing uncertainty over the “Fiscal Cliff”.
Japan:
Prime Minister Shinzo Abe has asked the Bank of Japan to provide unlimited easing programmes until the inflation rate in Japan hits 2 per cent. The Prime Minister can elect a new Central Bank Governor during the spring of 2013, if required or desired.
India: The Indian Rupee finished the week at 55.07 to the US dollar.
Gold US$ 1657 – down US$ 38 or 2.3 per cent from last week. Gold experienced a sort of déjà vu. The liquidation seen over the course of last week, reminded me strongly about the way, how gold price came under pressure in December 2011.
The selling pressure was evident at all times during last week’s proceedings. There has been speculation about the reason behind this relentless pressure. Some market participants believe that selling originated from a major hedge fund, who was selling gold, in order to be able to fund redemption requests. Other views are that some major put option positions are to blame. However, the damage is done, and this will be mostly felt in a potential change of sentiment towards gold.
The IMF statistics revealing that Brazil, Russia, Belarus and South Korea have increased their gold holdings during the month of November. Central Banks are clearly sticking to their plans and diversifying a small amount of their currency reserves into Gold.
Gold ETF`s are still registering record holdings and there is no indication that the buy and hold policies of the investment community is about to shift.
Physical purchases have been within the normal, for the time of year, expected scope and the above factor indicate that the reason for the sell-off is coming out of the derivative corner.
Gold price tanked down to the US$ 1635 level before closing for the week in the high 1650`s. The support levels at US$ 1675, US$ 1661 and US$ 1650 were demolished quite quickly and these breaches invited further stop loss selling and aided also fresh technical short sales. Friday’s price recovery was important, but it remains to be seen how the market holds out over the next few “holiday” sessions, with even more subdued liquidity on show. This can, of course also be the chance for significant price rises, as most of the technical selling is already done.
It is somewhat ironical that the premium to Platinum rose so much in this last week, as the pressure in all precious metals originated out of gold and that took all other metals with it.
The premium from Gold over Platinum rose last week to US$ 120.
The latest Commitment of Traders Report (COTR) shows a sharp reduction in long positions, accompanied by an increase in fresh short positions (end of business 18th December). It is only fair to expect the same scenario to have continued, as the week and the meltdown progressed.
Emirate: Dubai
Date: Dec 22, 2012
Back