Platinum, palladium benefit from gold rush

Financial markets are more bullish this morning. Commodities remain a risk story, with very high correlations between commodities and other asset classes. In this respect, all eyes will be on the US Fed this afternoon.

We expect the Fed to remain accommodative. The US Taylor-rule (a rule based model indicating where US nominal interest rates should be for the Fed to achieve its objective of high employment and low inflation) shows that US interest rates must stay low well into 2010. In fact, the rule still shows that nominal interest rates should be negative. An accommodative Fed should continue to support precious metals.

While we thought gold would remain range-bound, with resistance at $1,070, the metal has stormed through this resistance level, triggering more buying stops on the way up. The next target for gold: $1,100. There is large open-interest in December call options, with strikes at $1,100. While we see some physical selling, overall there are good two-way flows. Resistance is at $1,100, and support is at $1,080 and $1,065.

Platinum and palladium benefited from gold’s rush higher. Further support came from good US auto sales numbers for October; 10.45m units (annualised) were sold in the US in October (consensus: 9.8m). This follows good sales figure out off Japan earlier this week. Buy dips for palladium and platinum.

Silver is back above $17.00 as it shadows gold. Silver support is at 17.00 and $17.50, while resistance is at $17.60 and
$18.00.

Courtesy: Commodities Research, Standard Bank