CME Group lowers the margin requirements for gold, silver and platinum for first time since June 2011 as volatility drops:
21-day volatility has plunged from highs over 25%p.a. to currently be under 15%p.a., prompting the CME to reduce margins on precious metals by 12%, 14% and 22% for gold, silver and platinum, respectively. Ongoing uncertainty about the global economic outlook, however, contained price action in the precious metals space last week.
Gold trades narrow range, as uncertainty over Greece debt talks balanced by central bank stimulus: Gold eased off 10-week highs last week but offsetting influences have confined gold price to a narrow range between US$1700-$1760 over the past two weeks. Although gold’s positive correlation to other cyclical has risen recently, it has lagged the price gains of other precious metals over the past month. Investors remain cautious as the ongoing deliberations over the next tranche of Greek bailout funds threaten to break down, at the same time as central banks
ramp up stimulus efforts. Ongoing liquidity support from the European Central Bank and the additional $50bn QE stimulus pumped into the UK economy by the Bank of England at last week’s MPC meeting should help
keep the gold price supported. Recent currency volatility has also stymied physical buying, particularly in emerging markets as financial market sentiment remains unpredictable.
Platinum group metal (PGM) production stabilises in South Africa in December after consecutive double digit declines: PGM production rose by over 9% in December from a month earlier according to Statisics South Africa – equivalent to a decline of just 0.9% yoy. However, mass job cuts and safety related mining stoppages in South Africa – which accounts for over 55% of global PGM production - in early 2012 are likely to keep any production levels under pressure.
Choppy market action again this week ahead of Eurozone finance ministers meeting to discuss Greek bailout special conditions: Investors remain on edge ahead of the special Eurozone finance ministers meeting to seek ratification of special conditions ensuring austerity measures are retained after the Greek elections. The disappointing economic data from the Eurozone is likely to continue this week and will further highlight the widening divide from the more buoyant outlook for the US economy. Recent surprisingly strong jobs data in the US could be matched by an improvement in US retail sales this week, helping to buoy market sentiment. The FOMC minutes will also be closely watched to gauge the strength of committment of Fed Board members to give ongoing support to the US economy.
Courtesy: ETF Securities Ltd
