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Gold’s London AM fix this morning was USD
1,685.60, EUR 1,282.24 and GBP 1,068.26 per ounce.
Yesterday's AM fix was USD 1,698.00, EUR 1,286.17 and
GBP 1,073.60 per ounce.
Gold fell $6.30 in New York yesterday and closed above
the $1,700/oz level at $1,705.30/oz. Gold fell in
Asia prior to further modest price falls in Europe which saw it fall below yesterday's inter day low of $1,694/oz. Gold is now
trading at $1,686.40/oz.
Gold’s short term technicals
are poor and a further correction to or below the 200-day moving average at
$1,670/oz is possible (see Barcap
view below). However, it is worth noting that gold’s weakness has
coincided with recent dollar strength and gold has not fallen as much in
euro, pound or other fiat currency terms.
The fundamentals of significant macroeconomic, systemic
and monetary risk will support the precious metals. As will the increasingly
risky geopolitical situation - the risk of which is not priced into markets
just yet.
Swiss money manager and long term bear Marc Faber, aka
"Dr Doom", says political risk in the
Middle East has increased significantly with war between Iran and Israel
“almost inevitable”, and precious metals and equities investments
offer some safety.
"Political risk was high six months ago and is
higher now. I think sooner or later, the U.S. or Israel will strike Iran -
it's almost inevitable," Faber, who publishes the widely read Gloom Boom
and Doom Report, told Reuters on the sidelines of an investment conference.
Brent crude traded near $123 per barrel in volatile
trade on Tuesday on fears of a disruption in Iranian supplies. Israeli Prime
Minister Benjamin Netanyahu showed no signs of backing away from possible
military action against Iran following a Monday meeting with U.S. President
Barack Obama.
"Say war breaks out in the Middle East or anywhere
else, (U.S. Federal Reserve chairman) Mr Bernanke
will just print even more money -- they have no option...they haven't got the
money to finance a war," said Faber.
"You have to be in precious metals and equities
... most wars and most social unrest haven't destroyed corporations - they
usually survive," he said.
He said that Middle East markets had largely bottomed
out, though regime changes from the Arab Spring revolutions were unlikely to
be investor-friendly.
Faber said that in uncertain times, investors had to
reconcile themselves to volatility.
"If you can't live with volatility, stay in
bed," he said, pointing out that even cash [sic].
The 66 year-old, who has earned the moniker "Dr Doom", earlier told the conference that the
likelihood of war in the Middle East was boosted by Western powers'
imperatives of keeping China in check, given its dependence on Middle Eastern
oil.
"The Americans and the western powers know very
well they cannot contain China economically.... but one way to contain China
is to switch on and switch off the oil tap from the Middle East," he
said.
"I happen to think the Middle East will go up in
flames," he said.
Barclays Capital: Gold Support At 200 Day At $1670/oz - Buy Gold Dip
Barclays Capital said in a report that gold faces near
term hurdles such as bouts of dollar strength, broad risk reduction and
profit taking, but this is a healthy correction and the broader macro
backdrop remains gold favourable.
Barcap analysts see downside gold support at the
200-day moving average at $1670 and then at $1645. Upside resistance is at
$1730/$1760 and at $1800 and a close above $1800 would confirm further upside
as the broader macro backdrop remains gold favourable.
Given the negative interest rate environment,
longer-term inflationary concerns and lingering sovereign debt uncertainties.
Barcap said a weekly close below $1,719/oz will force it to adopt a neutral near-term bias on the
precious metal and "in such an instance, risk would increase for a
re-test of the 200-day average near $1,670/oz and
an extension of the six-month range trade before gaining traction in the
second half of the year."
OTHER NEWS
(Reuters Global Gold Forum) -- Industrial &
Commercial Bank of China's (ICBC), world's most valuable lender, gold leasing
business reached 62.8 T of physical metal last year. Industrial &
Commercial Bank of China's started leasing gold in January last year and
lends out to a year.
(Bloomberg) -- Cash Gold in China Falls for Second Day,
Futures Little Changed
Gold of 99.99 percent purity on the Shanghai Gold
Exchange fell for a second day, tracking an overnight decline in
international bullion prices. The benchmark cash contract slid as much as 0.7
percent to 345.50 yuan a gram, and last traded at
347 yuan. June-delivery metal was little changed at
348.73 yuan a gram on the Shanghai Futures
Exchange.
(Bloomberg) -- Silver Calls at Highest Since 2010 on
Economic Recovery: Options
Options traders are the most bullish in 16 months on an
exchange-traded fund tracking silver, this year’s best-performing
metal, betting it will continue its rally as the global economy recovers.
The ratio of calls to buy the iShares
Silver Trust versus puts to sell rose to 1.88-to-1 on March 2 and touched
1.93 on Feb. 24, the highest level since October 2010, according to data
compiled by Bloomberg. Traders pushed the price of calls that pay should the
exchange-traded fund rise 10 percent last week to the highest level since
April versus puts betting on a decline of the same size, data on 30-day
contracts show.
Investors are increasing speculation on gains after
silver surged 21 percent this year through yesterday, more than any other
commodity in the Standard & Poor’s GSCI Index of 24 raw materials
except gasoline. A recovery of the worldwide economy and central banks’
injection of stimulus are spurring demand for the metal, according to BGC
Partners Inc.’s Michael Purves.
“There’s optimism among silver call
buyers,” Donald Selkin, the New York-based
chief market strategist at National Securities Corp., which manages about $3
billion, said yesterday in a phone interview. “It’s a bet that silver
will continue advancing based on the industrial usage and the economic
improvement, as well as a flight to safety.”
Silver prices have swung along with economic
projections over the past year. Futures on the metal jumped 90 percent
between Jan. 28, 2011, and the three-decade high of $49.845 an ounce reached
on April 25. They then dropped 48 percent through Dec. 29 before climbing 29
percent through yesterday’s settlement of $33.695 an ounce. In 2011,
industrial demand accounted for 56 percent of silver consumption, according
to data compiled by Toronto-Dominion Bank.
Adding Jobs
Employers in the U.S., the world’s largest
economy, probably added more than 200,000 workers for a third straight month
in February amid optimism about the expansion, economists said before a
report this week. Payrolls increased by 210,000 last month after rising
243,000 in January, the most in nine months, and 203,000 at the end of 2011,
according to the median projection of 55 economists surveyed by Bloomberg
News. It would mark the strongest three-month stretch in almost a year.
The silver ETF, which is a security used to bet on
gains or hedge against losses, fell the most since November on Feb. 29, after
Federal Reserve Chairman Ben S. Bernanke gave no signal that the central bank
will take new steps to boost liquidity. The ETF dropped on March 2 after
Spain raised its budget-deficit target for 2012 and German retail sales
unexpectedly declined, and again yesterday after China pared the nation’s
economic growth target to 7.5 percent from an 8 percent goal in place since
2005.
‘Awful Lot’
“I don’t see an awful lot of upside in the
next month,” Bart Melek, the head of
commodity strategy at TD Securities Inc. in Toronto, said in a telephone interview
yesterday. “Silver is following gold as it’s a quasi-monetary
asset. From an industrial side, the Chinese have formally downgraded their
growth rate. I would not be surprised if the metal slips a few more
dollars.”
Implied volatility, the key gauge of options prices,
for 30-day contracts closest to the silver ETF’s price tumbled 57
percent from its Sept. 28 high to a one-year low of 31.88 on Feb. 24. It was
at 36.76 yesterday. Calls betting on a 10 percent gain on Feb. 28 cost 1.03
times more than puts protecting against a 10 percent decline, according to
data compiled by Bloomberg. That was the biggest gap since April.
‘Big Move’
“Some investors are anticipating a big move,
getting long through call options at these relatively low volatility levels,”
Purves, chief market strategist and head of
derivatives research at BGC Partners in New York, said yesterday in a
telephone interview. “There’s industrial demand if the world
economy recovers and an investment demand for silver as a hard currency.”
The number of outstanding shares of the silver ETF has
increased by 3.1 percent since this year’s low in January to 324.5
million on March 2, its highest level since October, data compiled by
Bloomberg show.
The Chicago Board Options Exchange Volatility Index, as
the VIX is known, gained 4.4 percent to 18.05 yesterday, while its European
counterpart, the VStoxx Index, added 5.5 percent to
23.80. The European volatility gauge increased another 5.2 percent to 25.04
as of 10:17 a.m. in Frankfurt today. The CBOE Silver ETF Volatility Index
rose 3.1 percent to 40.16 yesterday after falling on Feb. 17 to its lowest
level since the gauge’s inception a year ago.
Biggest Change
Since the last options expiration on Feb. 17, call
ownership for the silver fund gained 24 percent to 1.77 million on March 2,
versus a 23 percent increase for put open interest, data compiled by
Bloomberg show.
The five options with the biggest increases in
ownership since Feb. 17 were all calls, the data show. June $36 calls, with a
strike 9 percent above yesterday’s close, and June $35 calls added the
most, gaining 24,554 and 21,921 contracts, respectively, from none.
“It doesn’t just have the precious-metal
sheen to it, it’s got the industrial-metal sheen,” Jim Strugger, a derivatives strategist at MKM Partners LP in
Stamford, Connecticut, said in a telephone interview yesterday.
“It’s just a highly leveraged trade. Highly leveraged to
something better than Europe falling into a deep, dark hole and hard landing
in China. To me, that speaks to broad optimism for the most part.”
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NEWS
CNBC
Gold
Holds Around $1700; China Growth Worry Weighs
The Wall Street Journal
PRECIOUS METALS: Gold Extends Losses In Asia; China
News, Dollar Weigh
The Street
Gold Prices Keep Sliding as China Slashes Growth
Expectations
The Wall Street Journal
European Stocks Open Lower
COMMENTARY
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Desperation
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13,000 & Gold
Forbes
Warren Buffett May Know Value, But He Doesn't Know
What Money Is
The Financial Times
America and the Middle East: An Explosive Mix
Zero Hedge
Morgan Stanley's Latest 'Commodity Thermometer'
Mark
O’Byrne
Goldcore
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