Gold Spot Last: 332.50
April High: 335.80
Silver Spot High: 4.76
USD: 104.07
UBS Warburg:
As we enter the liquidity challenged festive season, a period of consolidation in the gold market looks likely. Fore reasons that we have explained below we believe that the speculative community is as long as it can get, but we do not expect a sharp pull back as we believe that traders will want to hold at least some, if not all, of the speculative long positions in the gold market as insurance
against a major terrorist attack or an escalation in the axis of evil war threat.
Gold: COTR: In the week to 10 December Comex trading speculators added substantially to their net long positions, with large speculators adding nearly 1.92 million ounces to their long holdings, taking the net long position to more than 5 million ounces. Together with the small speculators, the total traders position was net long 9.25 million ounces as of last Tuesday. Since then,
however, even more speculative buying has been seen with open interest increasing by 2 million ounces; 1.4 million ounces of new positions were opened on Thursday alone.
Trading: Gold started the day in New York with very good fund buying adding to their longs. US banks went with the flow but emerged between $335.20 and $336 as huge sellers. As the fund buying ceased it was not surprising that the selling took gold down to the lower range of $330.50 to $332.50 where we traded for most of the day. A big change in open interest kept the market in check until the closing bell. In Asia, gold trades nervous between $332.50 and $334.50 where the Japanese investors were seen as steady
buyers. With a quiet opening only small volumes changing hands in Europe around $334 with more volatility expected for this afternoons New York session.
View: The COTR report, together with the subsequent change in Comex open interest clarifies a number of issues. Firstly, it shows that Comex trading speculators have driven the vast majority of the recent moves during gold. Secondly, it shows that gold price is looking extremely toppish and that the pullback seen on Friday was only to be expected. Gold looks set to enter a period of consolidation now, establishing a new range between $310 and perhaps $335, the recent high.
1m 3m 6m 1y 3y 5y 10y
USD/XAU Impl Opt Vol (Mids) 18.4 17.6 16.4 15.7 13.7 12.9 12.3
Gold Fwd Rates 1.33 1.26 1.14 1.00
Silver: Trading: Silver had again a volatile session on Friday when initial fund buying at the opening bell ran into heavy selling by US banks. The market never looked back again until near the close and traded lower on a constant basis. The 200-day m/a held around $4.6750 and light short covering at the end pushed the white metal back to the middle of its large 11-cent range.
View: Silver has rallied for much the same reasons as has gold -- ie speculative buying and a weak dollar. Silver will take its direction from gold and the dollar and its trading range may have been shifted to a higher $4.45 - $4.75 range.
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