precious metals flash

Gold did another step forward after a successful Italian bond auction and a weak US GDP report for sent the USD lower. Global Gold ETF holdings saw an increase of 36’000 ounces or 1.1 tons from ETF Securities. Net Futures & Options positions on Comex as per last Tuesday look interesting. For Gold longs were reduced and shorts increased, which led to a drop in net length of 932’000 ounces to 17.4 Mio. ounces, not far from the January low of 16.8 Mio. ounces. Almost the same can be said of Silver, where net length fell another 25 Mio. ounces to 125.8 Mio. ounces. The lack of Silver interest is also evident by the sales number of 1 ounce American Silver Eagles, which fell to 1.32 Mio. coins in April, the lowest monthly reading since July 2008. Palladium net longs were the only ones with an increasing number to 778’000 ounces, mainly driven by short covering of 107’000 ounces and where we still feel that further shorts will be squeezed out. The most interesting read is on Platinum, where net length dropped to 901’000 ounces, with a large increase in short positions of 124’000 ounces. Large speculators have now a short position of 514’000 ounces, the second largest number ever and only beaten by 3000 ounces at the end of December 2011. Looking back, from a closing price of 1369 USD on 29th December, Platinum subsequently rallied to a high of 1737.25 in just 2 months, driving large specs to cover 372’000 ounces. These factors should provide support for Platinum on dips and leave it with a good potential to rally, should headlines of positive vehicle sales numbers or new supply disruptions out of South Africa hit the wires. In the news, Norilsk Nickel, the world’s largest Palladium producer said that production of Palladium fell 5% in the first quarter to 649’000 ounces, while Platinum production fell by 2% to 166’000 ounces. Given that it’s month end, we would expect precious metals to witness some push higher. Gold needs now to clear some major technical hurdles, with following moving averages on the June future ahead: 100 dma at 1676.50, 50 dma at 1681.60 and then the tough 200 day moving average at 1702. Additional resistance at 1682.25 can be expected from the 38.2 % Fibonacci retracement of the bearish move from 1794.30 to 1613.00. Looking at Comex option activity, buying interest for calls still outpaces puts by far, which suggests that bullishness is returning and provided 1702 can be cleared, a larger move higher can be expected for May.