Commodities | Apr 26 2012
The report outlined three main themes. Firstly, through out the quarter gold’s return in other major currencies have been significant, averaging above 4% on most currencies, with the investors in yen are seeing a 16.1% gain. This is important as it indicates to us that demand remains solid in the domestic markets around the world and reinforces our feeling that as the ETF markets become domesticated more people will look towards gold as an important part of an investment portfolio. This should see increased demand.
The move away from mining shares as a means to gain exposure to the sector will gain momentum.
Secondly, the WGC noted that the positive volatility skew was measured at 21.8% opposed to 16.4% for the bears which suggests investors have a greater propensity to invest on call options over puts. Finally, the report discounted the correlation between the bias that as equity valuations move higher Gold moves lower. It showed that a positive correlation exists between equity and gold prices. If equity prices move higher gold is also expected to move higher.
We continue to hold positions in both gold and silver, however as we trade around the lows we remain nervous. The good point is that the more time we spend at current levels the stronger the support gets.
Chart point:
The range for Gold looks to be US1630 to US1665 and we continue to see range-trading opportunities. Continue to focus on US1665 as potential break out to the topside. In silver support comes in US 30.75 and resistance at US 32.70. Daily momentum indicators for both gold and silver remain mixed however on the lows.
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