UBS Warburg:
We estimate that Comex trading speculators have added approximately 1 million ounces to their net long position since the last COTR data was collected on Tuesday 3rd. There is still room for further speculative buying to lift gold, however, should this week pass off calmly we believe that the strength in gold could prove short-lived and that gold could head back down towards 310.
Gold: News: China, expecting to produce a record amount of gold this year, is looking for ways to attract foreign investment into its insular and rigidly protected gold mining and exploration sector, a senior official said on Monday. China, one of the world’s top five gold producers, has around 1,200 gold mining firms, but many of them are very small and inefficient, according Cheng Fumin,
director-general of the gold bureau at the powerful State Economic and Trade Commission. The top 24 producers mine 75 percent of China’s output, which is expected hit a record of about 190 tonnes this year after last year’s 181.83 tonnes, he said. "Our output will probably hit about 190 tonnes this year because prices are good now and gold producers want to take advantage of that,"he said. "Basically, we are aiming to achieve annual growth of seven percent in gold production, but we should be able to exceed this target," he said. (Reuters)
Trading: Immediately after the New York open speculative and professional selling was seen and gold traded down to the lows however, with US equity markets under pressure and gold shares firm the metal began to rally as commission houses and banks bought gold. Gold saw good two-way business around the $323 level but one US investment bank then pushed gold lower into the close. In Asia, further bank selling triggered liquidation from the professional and speculative community, almost all of which we
believe are now long. Gold dropped a dollar very quickly and has hardly paused for break slipping steadily lower into early European trading.
Options: Implied gold volatility are higher than at the same time yesterday although off yesterday’s highs; implied volatility and skew remains highly correlated with the spot gold price.
View: Although gold has succumbed to some profit taking overnight, the metal looks set to be supported / set to move higher as we approach the anniversary of the 9-11 attack on the US and the expectations of an attack on Iraq intensifies. The quick sell-off in the last 18 hours may be an indication how bullion will react should this week pass off without any incidents and the risks of a war with
Iraq recede.
1m 3m 6m 1y 3y 5y 10y
USD/XAU Impl Opt Vol (Mids) 20.0 18.4 17.25 15.75 13.75 13.0 12.35
Gold Fwd Rates 1.73 1.65 1.51 1.32 1.75 2.35 3.32
Silver: Trading: In New York, silver continued to diverge from gold, trading quietly and ending the day on its lows. Silver remains quiet in Asia and implied volatility remains unchanged.
View: Against our expectation silver speculators continue to get shorter the metal and this, we believe, is setting the market up for a sharp rally at some point in the coming months.
thebulliondesk.com |
