By Walter de Wet
The dollar has strengthened substantially since yesterday morning, with the trade-weighted dollar gaining almost 1.5%. Nevertheless, precious metals, especially gold, are holding up well; this demonstrates demand despite dollar strength. Gold seems a good buy in euro.

We have seen a steady physical buying in gold since the start of the year. The buying interest is not overwhelming, but it definitely outpaces the selling. However, the buying interest is being offset by selling in ETF holdings. The SPDR fund (the largest physically backed gold ETF in the world) shed 16.8 tonnes since the start of the year. As long as the dollar appreciates, we doubt that ETF holdings will rise.

Gold is range-bound between $1,120 and $1,145. A break below $1,120 could see the metal test $1,115.

The US platinum ETF holdings continue to rise and are now just over 160K oz. While above ground stock for platinum is high, we believe that ETF holdings are farther removed from the market that other above-ground stock. As a result the physical market is tightening up. We estimate ETF holdings now constitute 54% of total above ground stock (refer to Commodities Daily 19 January 2010).

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This leaves available platinum stock in Switzerland and COMEX at the lowest levels in at least five years. We would buy platinum on dips and see more upside despite the recent rally. Support for platinum is at $1,620 and $1,600 Palladium buying interest remains in place. Support is at $458 and resistance at $472.

Courtesy: Standard Bank

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