UBS Warburg:
Equity market weakness and economic fragility continue to support gold at the moment but the market is lacking a driver to break it out of the current $318.50 / $324.50 range.
Gold: News: South Africa may be forced to put the brakes on rapid expansion in the country’s gold and platinum industry after a recent rise in mine deaths, the country’s chief mine inspector said on Thursday. "We might have to say we have to put the brakes on. We hope we don’t need to, but we’re at break point," May Hermanus, chief mine inspector told Reuters in an interview. "The sectors are expanding rapidly at the moment and bringing in many new people for the first time...There is also big demand for these
commodities (gold and platinum)," she said. (Reuters)
Options: Implied gold volatility fell further yesterday and now stand at around 2 vol lower in the one month. Although spot gold has remained in a broad range, we think that further falls are unlikely as intraday moves in gold continue to be large.
Trading: Gold had another rangebound, lacklustre day yesterday in New York. The metal traded lower as equities rallied after betterthan-expected US economic data but as equities quickly gave back these gains, the yellow metal predictably rallied and spent much of the rest of the day around the $323 level. Just before the close one large and active US bank sold gold hard, looking to test the
downside and the metal made new lows, however, once the bank finished selling gold rallied a quick half-dollar. In Asia, the quiet mood continued with thin flows exacerbating volatility in otherwise quiet trading with late afternoon buying from Japan was the only feature of note. Gold has traded quietly above $322 in early European hours.
View: Gold will continue to trade between $318 and $328 depending on changes in this speculative interest in gold: a change in the recent drivers to gold will be required to break gold out of this range.
1m 3m 6m 1y 3y 5y 10y
USD/XAU Impl Opt Vol (Mids) 17.5 16.75 16.4 15.3 13.3 12.85 12.2
Gold Fwd Rates 1.74 1.58 1.38 1.20 1.61 2.03 2.99
Silver: Trading: After the previous day’s activity silver turned quiet yesterday with some US bank and commission house selling noted, which took silver down to the low of the day. The significant $4.47 level held yesterday but our traders feel that a test of $4.42 is looking increasingly likely.
View: Our traders feel that silver looks weak after the recent price action and that there is room for the market to test the $4.42 level, although we believe that this support should hold.
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