Financial markets are nervous; we expect precious metals to remain range-bound. Precious metals remain well supported despite dollar strength; we see limited upside ahead of tomorrow’s Fed meeting. The Fed is due to decide on its next move on US monetary policy. Financial markets have come to rely on liquidity provided by central banks, and signs of liquidity withdrawal are setting markets on edge.
The Reserve Bank of Australia has increased interest rates by 25 bps — the second time in as many meetings. This has made markets really edgy ahead of tomorrow’s Fed meeting and Thursday’s ECB meeting.
However, we believe the Fed will signal continued accommodative policy well into 2010, which would not only calm current market fears, but also support commodities. As a result, being long ahead of the meeting might be preferred. Buy dips.
The IMF has sold 200 tonnes of gold to the Reserve Bank of India at an average price of $1,045. These 200 tonnes are part of the IMF’s 403.3 tonnes gold it had said it would sell. The IMF has sold almost half of its 403 tonnes without a major disruption; we view this as supportive of the gold price. The rest of the IMF’s holdings will probably be sold to other central banks.
There was good physical gold selling on the highs yesterday; the current trading range for gold is between $1,040 and $1,070. We expect this to hold. With base metals under pressure, combined with a stronger dollar, silver is set to struggle. support is at $16.25 and $16.00, with resistance at $16.70 and $16.90.
US manufacturing orders data is due this afternoon, and this evening, ABC consumer confidence in the US as well as US car sales data.
On the PGM front, look out for US car sales (tonight). Any number higher than 9.8m units sold (annualized) should be viewed as bullish and could support specifically palladium.
Courtesy: Commodities Research, Standard Bank
