Gold is bullish, and there is no sense in shorting the metal. Our preferred strategy since June has been to buy the dips — we believe this still holds. Despite weak US consumer confidence data on Friday, risky assets such as equities and commodities have rallied.
Liquidity seems to have drowned the market’s fears. Partly because of this liquidity provided by the Fed, we still expect the dollar to depreciate towards $1.60 against the euro by the end of Q1:10. If liquidity remains ample and the dollar is weakening, as a general rule, investors should be long precious metals and not outright short any commodity.
Gold rallied to $1,133 this morning in Asia after the market was seemingly caught short on Friday. There is some resistance at $1,130, which may see gold drop to $1,125 and possibly $1,110. Such dips should be bought. Our next target for gold remains $1,150 — a real possibility.
Should $1,150 break in the next couple of days, $1,200 would be our next target. (There is also about 3m oz of open interest on the COMEX calls with strike at $1,200. Expiry for these options is next Monday.)
Silver is higher on the back of gold. However, the $18.00 level still offers strong resistance, which we expect to hold. Silver
support is at $17.40 and $17.00, and resistance is at $18.00 and $18.25.
We remain bullish on PGM (refer to Focus). However, some consolidation may be on the cards. Key to precious metals will be US retail sales data this afternoon. Better-than-expected data may see US equities rise and the dollar fall.
Courtesy: Commodities Research, Standard Bank
