Gold benefits from scrap inflows, ETF holdings

March 16, 2009

Commodity Online
With the gold price around $900, scrap inflows have slowed. However, selling interest from physical players still seems keen as gold approaches $950. Sentiment towards gold is much more positive than a week ago. The SPDR Fund added another 419,507oz in New York on Friday.

Gold has been benefiting from reduced scrap inflows and increased ETF holdings.

However, we believe that ETF buying momentum isn’t enough for gold to break above $950. Still, the options markets suggest a gold price above $950. Call options on the April gold futures contract, with a strike at $950, have risen quite sharply over the past two days, while put option volumes with a strike of $900 have declined substantially.

The latest CFTC data for the week ending 13 March is slightly less optimistic. Non-commercial positions have decreased in net length by 14,505 futures contracts. This is the third week running of declines. However, the futures market seems more bullish on platinum and palladium.

The net long non-commercial positions for platinum have risen by 99 contracts, to 8,250. Those for palladium have increased by 175 contracts, to 4,417. Volatility remains a major deterrent for many investors. The week ahead is packed with data releases, especially in the Eurozone, which starts tomorrow with the release of February CPI data.

We believe equities’ performance will remain key for precious metals’ performance. The equity futures market indicates that US equities could be in the red again today. This should support precious metal prices.

Gold opened at $925 in Asia and then eased to $920 at the London AM fix. Gold pushed higher during London trade, climbing to $938 before dropping to $928 at the PM fix. After rising to $940 in New York, it fell to $921 before closing at $929.70. Primary support is at $923, with secondary support at $920 and $914. Resistance is at $930, $934 and $940.

Silver rose from $12.89 to $13.05 in Asia before rising to $13.30 in London and then easing to $13.11 at the PM fix. It returned to $13.29 in New York before settling at $13.22 at the close.

Platinum was erratic in Asia and London, bouncing between $1,059 and $1,053 before rising to $1,060 in NY and then closing at $1,054. Palladium touched $201 in London. In New York, it bounced between $196 and $199 before settling at $198 at the close. Rhodium fixed at $1,120.

Courtesy: Commodities Research, Standard Bank

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