By Walter de Wet
Following gold’s on Thursday last week, good physical demand has been supporting the price. At the same time, ETF holdings remain largely unchanged. In fact, as of yesterday, the latest figures show that ETF holdings are marginally higher, having added 134,189oz since last week.
We continue to focus on Europe’s debt burden. During Q2:10, the roll-over of government debt by Greece and Spain were cause of great concern to markets. We now look to Italy which is starting to roll sizable amounts of debt in August. Between August and November, Italy must roll around Eur134bn. This dwarfs anything Spain and Greece had to roll, even after accounting for size of GDP. Furthermore, Italy's debt stock is at 115% of GDP, much higher than that of either Spain or Greece.
In terms of FX, Standard Bank sees the euro at $1.15 at the end of this quarter. Thereafter, we see even more downside to the euro. As always, the impact of FX moves on commodity prices depends on the speed of depreciation/appreciation.
It is clear to us that concerns over Europe’s sovereign debt burden will remain at the forefront for the rest of the year. At the same time, interest rates are set to remain low. We therefore believe that investment demand for gold will remain strong. We still target $1,300 for gold in Q4:10.
Combined with our view on the euro, we expect gold in euros to outperform gold in dollars. Our only concern to this view is potential money market problems in Europe. Three-month Euribor continues to rise (it closed at 0.79% yesterday). A breakdown of money markets would be detrimental — even to gold.
Gold support is at $1,205 and $1,201, resistance at $1,213 and $1,218.
Platinum and palladium remain range-bound. Our view on the metals is unchanged. We see value below $1,500 and $420 for platinum and palladium respectively. We would not be surprised if both metals push a bit lower in coming days. Platinum support is at $1,485 and $1,450, palladium support is at $428 and $420.
