PRECIOUS METALS WEEKLY 11 August 2006
ALEXANDER ZUMPFE TEL.: +49 (0) 6181 / 35-5128
Precious Metals Weekly 11 August 2006
HIGHLIGHTS
TERROR ALERT FAILS TO DELIVER SUSTAINABLE SUPPORT TO GOLD
MINERS PLAN TO LEAVE INCREASING AMOUNT OF FUTURE PRODUCTION UNHEDGED
SUMMER MOOD KEEPS PGMS RANGE BOUND.
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PRECIOUS METALS WEEKLY 11 August 2006
A TERROR ALERT IN THE UK FAILED TO expectation that consumers will wait for lower prices DELIVER SUSTAINABLE SUPPORT FOR THE and start buying on dips as soon as the metal breaks through its support around $ 315. Demand is PRECIOUS METALS COMPLEX: ‘SAFE HAVEN” then likely to strengthen further around the more GOLD MOVED UP INITIALLY AFTER THE NEWS pivotal $ 300. CAME OUT BUT RAN INTO HEAVY SELLING LATER THE DAY – SILVER FOLLOWED SUIT. RHODIUM THE FED LEFT INTEREST RATES UNCHANGED AT 5.25% ON TUESDAY’S MEETING AND Rhodium continues to see very limited two-way business which keeps prices caught between NOTED THAT “ECONOMIC GROWTH HAS $4,575 and $4,675. Activities should remain limited MODERATED” AND “INFLATION PRESSURES during the summer holiday period and hence we SEEM LIKELY TO MODERATE OVER TIME”. IN don’t expect prices to move significantly from current levels. THE AFTERMATH OF THE DECISION THE There are no changes to report in the ruthenium-($ DOLLAR FACED A SHORT TERM SELL OFF - - 170) and the iridium markets ($400 an ounce). ONLY TO RECOVER IN THE FOLLOWING SESSION. GOLD PLATINUM News about an averted terrorist attack on flights going from the UK to the United States initially supported the gold price on Thursday – the metal The summer doldrums continue to weigh on soared to $ 654 before significant long liquidation consumer demand for platinum. Activities were brought it back to the low at $ 633. As often largely investor driven with good support on witnessed in the past, gold as a ‘safe haven’ Thursday when the metal moved up to $ 1,253 in strengthened on the initial release of fresh news. line with the overall strong precious metals sector. However, usually it requires an ongoing news-flow Some pressure occurred later the day when long to keep up the demand for the metal. In this case liquidation in gold and silver also triggered selling in one has to note that this was after all a terror ‘alert’ platinum which pushed it back towards $ 1,242. and not a terror ‘attack’. We guess that this was one Looking ahead the metal is likely to continue to take reason behind the selling. It came together with a its major lead from the other precious metals. We stronger dollar and a declining oil price which lost think that it will keep on hovering sideways with dips ground due to fears that future air traffic might be hit to levels around 1,200 likely to attract some by the events in London. consumer bargain hunting – despite the summer! Good technical resistance in turn is likely to occur Former hedging friend AngloGold Ashanti around $ 1,265. announced on Monday it will leave an increasing amount of its production unhedged to take
advantage of a rising gold price. According to company officials, the miner has left 84 percent of PALLADIUM this year’s production unhedged compared to 75 percent in 2005. While AngloGold considered hedging as a risk management tool in the past, the With again no fundamental news around, we company sees presently less need for protection. concentrate once more on the actual price AngloGold bought Ashanti in 2004 after the latter development: Despite temporary strength in the faced financial issues due to its hedging program, other precious metals, palladium seems to be which forced Ashanti to buy gold high and sell it low caught below $ 330. As soon as the metal breaks to meet its sales obligations. Newcrest Mining is through the upper end of its $ 316-324 trading range also underlining its non-hedging policy by lowering good selling comes in from the investment sector. the hedge amount to 50 percent by mid 2007 from Buying interest in turn is rather limited due to the currently 75 to 80 percent. The company wants to holiday season and the overall rather bearish take part in a higher gold price, the newly appointed sentiment for the metal. The latter contributes to our
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PRECIOUS METALS WEEKLY 11 August 2006
Managing Director Ian Smith said. Newmont is A report about China’s silver consumption and mining 1.5 Moz gold and holds currently a hedge production provided some discussion in the position of approximately 4.7 Moz. community: Xinhua news agency is quoting a South African gold output fell 9,5 percent in volume source with the “Gemological Assoication of China” terms while overall minerals production declined 1.2 saying that China has become the world’s third percent in June compared with the same month the biggest silver supplier with an all-time record previous year, Reuters is quoting official data by production of 7,196 tons in 2005. Some Statistics South Africa. commentators found this development irreproducible. They are quoting numbers of the Further bearish news are coming from the demand Silver Institute which show a Chinese production of side of the market: Turkish gold jewellery exports approximately 2,000 tons in 2005.This in turn would fell 26.1 percent year-on-year to 44.45 tonnes in the mean that China is only the fourth largest producer first seven months of the year, Turkish Association after Peru, Mexico and Australia. of Jewellers data showed on Thursday. (Reuters) This together with subdued physical demand out of The silver price chart is looking somewhat more India and Dubai (see last week’s report) leaves a encouraging than gold and actually we would say rather muted picture of this sector of the market. that the metal could enter a period of consolidation Though some demand might return out of India due with the chance of testing its previous highs again. to the upcoming festival season and though Turkish However, despite that it outperformed gold recently, exports might rise again when we are approaching it is hard to imagine that silver will move Christmas season we stick to our view that it independently from the yellow metal. The pivotal requires a less volatile metal price to stabilize or point is $ 12 and a break below might be seen if stimulate physical demand. gold should weaken. This is likely to trigger further selling with a test of 11.89 and then 11.70 on the In the meantime, the gold ETF hast reached another cards then. country: According to an announcement by the State Street Global Advisors and the World Gold Council on Thursday, streettracks Gold Shares has commenced trading in Mexico. The other securities trade on the London, Johannesburg and Sydney stock exchanges as well as on Euronext in Paris. Going into next week, we expect gold to enter a period of range trading with the possibility of lower prices if $ 633 (this week’s low) fails to deliver sufficient support. Indicators show that the recent uptrend is losing momentum. This is backed by actual market developments in so far as gold recently failed to make more out of what are usually stimulating triggers: the rising oil price, declining dollar and last but not least geopolitical uncertainties. The failure of an underlying to follow news accordingly is often a sign that a trend is about to end or to turn. However, given the current environment this doesn’t necessarily mean that gold is close to a significant correction – initial support is already likely to occur around 610.
SILVER Silver moved once again parallel to the gold price i.e. it moved up to $ 12.64 on Thursday before running into heavy selling in the US market where it dipped to $ 12.03.
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