Risk appetite remains in place: the dollar continues to weaken this morning; equities performed very well yesterday, US treasury yields are higher, and high-yielding currencies are stronger.
However, commodities have failed to respond. In the futures market, many of the commodities have very long spec length, which is possibly adding to reluctance to add further long positions. Looking at the broader market, upside bias might remain. However, US will have a data-heavy day today, which might restrain the markets.
US CPI is due for release; we expect a further y/y decline. M/m, it should show a small rise. But overall, the data should show very few inflationary pressures. In the US, the market continues to price a very low probability to any rise in interest rates.
According to the futures market, there is only a 32% prob. of a 25 bps rise by June next year. The options market sees this probability at only 5%. So, from a liquidity perspective, this remains supportive of precious metals.
At current price levels, there is little appetite in the physical gold market. Scrap selling continues, which is adding to the resistance. We expect resistance to remain in place until the dollar weakens further. Gold support is at $1,050 and $1,040, with resistance at $1,070 and $1,077.
EU new car registrations have increased 6.3% in September — a very positive sign. This is the biggest monthly rise since April last year. However, much of the rise can be attributed to government assistance to new car buyers in the Eurozone. Platinum and palladium are also finding resistance and are trading lower. However, we do believe there are more upside for both metals in Q4.
With gold trading just above $1,050, and copper finding strong resistance, silver might see downside today. Gold is $17.30 and $17.00, while resistance is at $17.90 and $18.30.
Courtesy: Commodities Research, Standard Bank
