UBS Warburg:
Gold continues to trade in a narrow range, taking its direction from currency and equity markets. Volumes remain low although there is some indication of decent buying interest beneath $332/oz.
Gold: News: South Africa, the world’s biggest miner of gold and platinum, unveiled a new royalty regime for mining companies on Thursday with rates ranging between one and eight percent of gross sales. The bill proposes a royalty rate of three percent on gold, four percent on platinum and eight percent on diamonds, the highest rate under the new regime. Coal and metals such as copper, cobalt, iron, manganese, zinc and nickel are set at two percent. The public and industry will have about four weeks to comment on
the bill before it is submitted to parliament for hearings in May and June. Finance Minister Trevor Manuel said the regime balances the nation’s right to share in its mineral wealth and the need for companies to stay internationally competitive (Reuters).
Trading: In New York yesterday, gold had another thin, choppy trading session. Speculative selling was seen immediately after the open and gold quickly traded down to $333.50 offered where one US bank was seen bidding for gold. With the dollar weakening and stocks selling off gold traded higher, back up to $335 bid when news hit the market that Iraqi oil fields were on fire. As soon as the
buying ceased, gold lost two dollars and traded back into the $334.50 / $335.50 range again where it remained for the rest of the day until some late speculative selling knocked gold back into the close. Gold was quiet in Asia with Tocom closed for a holiday. Light physical demand was reported on the lows. Gold has remained quiet in the first couple of hours of European trading.
View: With hostilities underway liquidity in the gold market has fallen further and volatile trading looks to be the order of the day. The market will now react to the perceived progress of the war with a quick, clean victory likely to lead to some selling pressure in the near term.
Silver: Trading: Silver opened on the lows with good bids noted from US and European professionals against speculative selling but when this selling was completed, silver moved higher, following gold and the fire-inspired oil market. After hitting highs around $4.45, silver then came off on speculative selling and closed near the lows.
View: Long liquidation, which has taken its toll on the silver price of late, has tailed off. While short term political developments will undoubtedly have a marked effect, the reduced speculative long position leaves room for upside when the trigger arrives.
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