NEM to lower gold hedge by 1 Mil ozs.
UBS Warburg
Gold: News: Newmont Mining Ltd said today it expects to reduce gold hedge positions of the former Normandy Mining by a further 1 mio ounces this year. Newmont in Feburary acquired Normandy. Newmont’s COO Wayne Murdy said to Reuters that Normandy’s multi-year hedges stood at around 7.3 million ounces at the end of the first quarter, down from 9.5 million ounces in February.
Trading: Comex continued the overnight access selling pressure throughout yesterdays trading session as some profit taking stops were hit on the way down. Liquidity was very tight, which may have exaggerated the move. The first support level around 320.50 was well defended and the yellow metal rallied on some last minute buying, as the Euro helped to attract buying from the jewellery sector.
The inter-bank market was rather moderate today, as most action was seen on the floor. Another active day in Asia with news of Newmont cutting more gold hedges brought the Asia market back up to a $324 bid. After the European opening the lower EUR and AUD dragging gold a little lower, where good physical demand matched the selling.
Options: Volatility’s were down 0.7% around the curve.
View: Gold’s short-term direction feels testing lower levels, as some profit taking in Gold stocks may have spilled over into the spot.
As speculative position remains very long, albeit slightly lower than recently, gold remains vulnerable to more long liquidation with first support seen at $320.50 and $316, from where it should take another look at the resistance of $330.
Silver: Trading: Silver opened on the highs on Comex, starting to get hit by some commission houses. A New York Bank continued the selling in the cash market and caught traders long, pushing the silver down to the lows. Small stops around $4.96 pushed it further in tandem with the yellow metal to the lows around $4.92 where decent buyers were found. The Asian market was rather quiet and no new impulse was found after the European opening, trading at $4.93/95.
Options: Vols down 0.5% around the curve.
View: This 19 cents move confirms the speculative nature of Silver, which has rallied mostly due to speculative buying according to information contained in the COTR report. It is hard to get as excited about silver as gold since, unlike in gold, there is no apparent de-hedging initiative in the silver market. The size and impact of hedging in the silver market is in any case much less than is the case in gold. A new range between 4.90 and 5.10 should now be established. |
