Commodity Online
Is scrap gold flooding the market even as the yellow metal prices are caught in volatile trading in global exchanges? According to an analysis from Standard Bank, scrap gold flooding the commodities market still far outweighs gold holdings by exchange traded funds (ETFs).
"Investor demand has failed to offset scrap gold inflows. As a result, gold declined sharply yesterday, dropping below $940 and even testing the $931 support level in NY. Risk appetite in financial markets has improved, which supported equities in Europe and the US," said the commodities research report from Standard Bank.
Most EM currencies also traded stronger yesterday. Commodities like crude oil and base metals that depend on industrial activity also found support. Platinum also benefited from the positive sentiment, resisting a sell-off in gold’s wake.
However, silver was sold off aggressively. Gold ETF buying has been flat since Monday, adding only 800kg to gold holdings. Scrap gold flooding the market still far outweighs this. However, since last week, scrap inflows have slowed somewhat. The lower gold price should encourage EFT buying, while gold scrap flows may continue to fall.
Will the sudden improvement in risk appetite last? "We see no evidence yet that the global economy will improve.
Most leading indicators for large economies are still pointing to a continued slowdown in real economic activity," says the report.
Furthermore, unemployment in the US is rising (per initial jobless claims data), and US new home sales have declined further. Together with existing home sales data released on Tuesday, this confirms a US housing market in distress. In the Eurozone, consumer confidence dipped to a new low yesterday. While most commodities have already priced in most of the bad news, uncertainty remains pervasive.
Gold tested lows right from the start in Tokyo. Initially, the $945 level held up, and at one stage in Europe, gold seem poised to break above $960. But in New York, gold was sold off fast. Initial support was at $931. Gold then pushed to a close of $942 in NY. Primary support is at $930, with secondary support at $922 and $905. Resistance is at $947, $956 and $973.
Silver tracked gold, dropping below $13.20. It found support at $13.00. In NY, the metal opened at $13.57 but dropped to $12.96 at the close.
Platinum remained well supported despite gold giving up its gains. Every time platinum dipped below $1,050, buying was spurred. We maintain that the metal reaches overbought territory on approach of $1,050. After reaching lows of $1,043 in NY, it climbed to $1,058 before consolidating at $1,044.
Palladium ranged between $195 and $200 in Asia and London. In NY, it slipped to $194, and closed at $194. Rhodium fixed higher, at $1,145.
