Broker’s Notes: Gold and silver continue to streak higher

Gold

Gold ticked closer to a lifetime high on Monday and could make another attempt to break $1,300 an ounce as worries about the global economy linger, while silver rose to a 30-year high on rising investment demand. Silver, often considered the poor man's gold, has gained nearly 30 per cent this year, attracting interest as a cheaper alternative. Platinum and palladium tracked shares higher. The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose to a record high at 9,613.02 tonnes by September 24 from 9,582.59 tonnes on September 23. Silver's main sources of demand are for use in industrial applications such as semi-conductors and jewellery. 

According to the media, the European Central Bank sold 6.2 tonnes of gold in the past year, the lowest in 11 years, as a sovereign debt crisis gripped the continent. Sales fell 96 per cent in the CBGA's year to September which expired on Sunday, the report said, citing provisional data. It was the lowest since the Central Bank Gold Agreement was signed in 1999, and down from the peak of 497 tonnes in 2004/2005, according to the report. European central banks are unlikely to sell much more gold in the new CBGA year, according to a survey. Annual sales under the pact are limited to 400 tonnes, down from 500 tonnes in the second agreement, which expired in late September. Sales under the new pact, which started in September 2009 and expires in September 2014, have been low. 

Dollar

The dollar edged up from five-month lows on Monday as the euro ran into profit-taking. Euro seems to be facing some profit-taking after also gaining 6 per cent on the dollar this month and hitting its highest since April on Friday at $1.3496. It stood at $1.3463 on Monday and faced significant resistance at $1.3510, which is the 50 per cent retracement of its fall from above $1.51 last November to its June low below $1.19. There was talk of a barrier at $1.3525 with stop-loss buy orders above that level. Some caution might also be setting in on the euro ahead of European Central Bank tenders due to expire this week. Banks are preparing to repay 225 billion euros ($303.5 billion) of 12-, six- and three-month funds to the ECB on September 30. They have the option of rolling over lending into three-month and six-day operations.

The dollar index a measure of its performance against six currencies, edged up 0.1 percent to 79.404 after dropping to its lowest in almost eight months on Friday at 79.25. It fell through the 61.8 percent retracement of its rally from November to June on Friday, a bearish signal. 

Sterling

Sterling rallied to a six-week high against the dollar on Friday as the US currency came under broad selling pressure after weak US housing market data highlighted weakness in the economy. Weak new home sales helped push the pound up more than 1 per cent on the day versus the dollar. But sterling slipped against the euro after a surprising rise in German business sentiment eased concerns about the euro zone economy. 

Oil

Oil was steady on Monday, trading close to a two-week high near $77 reached earlier, as energy and commodities regained the favour of investors with a weaker dollar, rising equities and resurfacing risk appetite. Data from the Commodity Futures Trading Commission reveals that trader cut net-long crude oil positions on the New York Mercantile Exchange to less than 97,000 barrels in the week through September 21 from almost 114,000 a week earlier. That means the number of people betting for higher prices decreased over the period, and the turnaround in prices at the end of last week on the back of positive economic data created incentives to revert those positions. 

Source: Richcomm Global Services DMCC, Dubai