Precious Metals Report
Leonard Kaplan
>>Such interest has arisen due to the failing USD, volatile equity markets and the most uncertain geo-political conditions. With interest on the USD now at 40 year lows, it is thought that perhaps certain nations will consider adding to their gold reserves. Asian Central Banks hold only 1-5% of their assets in gold, compared to 30-40% for their European counterparts. And the use of gold as a currency is still being championed by Malaysia who is pushing for use of the gold dinar as the currency of choice in the Islamic world.<<
Prospector Asset Management
For markets of Wednesday Aug 21, 2002
GENERAL COMMENTS:
On Monday, aggressive selling by speculative forces forced the gold price back to its support level of $305 to $306. The silver market also experienced large commodity fund selling and was pushed to price levels not seen since February of this year. The last time silver traded at these prices, gold was some $20 lower in value. As we expected, platinum failed to penetrate technical resistance levels at the $560 price levels, and has dropped some $15 in just a few days.
The gold market seems completely mired within a well-known and well-traveled trading range of $305 on the downside, and successive levels of resistance at $310, $314, and $318 (all basis spot price). Although there are certainly many supportive and bullish considerations in the market, I find it unlikely that we will break either of the technical constraints in this market. Although oil prices have rallied sharply of late, underscoring the saber rattling between the USA and Iraq, although German officials specifically stated that they would NOT sell gold to aid the flood victims in that nation, and although Indian gold demand will be higher in weeks to come, professional short selling is, at this point in time, enough to keep gold tamed within its cage.
Silver seems particularly cheap at these prices levels, although to be fair, I thought the price to be cheap some 20 cents higher. I was obviously wrong. Silver prices has fallen below the 200 day moving average, which is undeniably a negative signal and this has elicited fairly aggressive selling by both the trade and speculative concerns. Having watched this market for well over 20 years, I must comment that silver is NOT a good technical market, and any technical signals must be given considerably less merit than usual. Silver needs to trade over $4.50 to get going again.
Platinum has fallen considerably over the past few days, and traders who follow our recommendations now have more than decent profits, marked to market. Over the past few weeks, this market was bulled higher in price by the market's doubt that South African platinum production was indeed going to increase by 50-70% over the next 5 years and speculative buying seen in Japan and the USA. While expectations of higher prices pushed this market higher, now the reality of poor demand is forcing it lower, and quickly. There is some anecdotal evidence that some Central Bankers, especially in the Far East, are beginning to look at gold again as a reserve currency.
Such interest has arisen due to the failing USD, volatile equity markets and the most uncertain geo-political conditions. With interest on the USD now at 40 year lows, it is thought that perhaps certain nations will consider adding to their gold reserves. Asian Central Banks hold only 1-5% of their assets in gold, compared to 30-40% for their European counterparts. And the use of gold as a currency is still being championed by Malaysia who is pushing for use of the gold dinar as the currency of choice in the Islamic world.
To quote Nor Mohamed Yakcop, The gold dinar could be an important facilitating mechanism to move away from an inherently unstable and ultimately unjust global monetary system. Please understand that such interest in gold, and any resultant economic plans, are simply rhetoric at this point and time. There is no hard evidence that anything of importance will emerge to enlarge gold demand at this point in time.
Leonard Kaplan |
