precious metals flash

The first sell off in risk came with the downgrading of Japan by two notches from Fitch and later in the day by critics on the Eurozone by Cina Investment Corporation as well as headlines from news agencies that previous Greek Prime Minister Papademos would have said Greece was preparing for leaving the Euro. In early Asian hours Papademos denied the allegations, but enough damage was done already. Gold had dropped to 1555, Silver to 27.75, Platinum to 1430 and Palladium found support only ahead of the psychological 600 USD level. Fundamentally bearish were comments by the All India Gems & Jewellery Federation. They expect Gold demand to remain sluggish until September due to the lower Rupee, as well as higher taxes and on the whole year to fall by 30%. This would be 280 tons less demand than in 2011, which corresponds to 10% of World Mine Supply of last year. ZKB reports ETF holdings dropped 82’000 ounces or 2.5 tons and we witnessed selling of about half the size yesterday afternoon on our own funds. There is Comex June option expiry tomorrow, with 1.1 Mio. ounces of open interest on the 1500 USD, as well as 1600 USD strike and 787’000 ounces on the 1550 strike. Where the next direction will lead is probably a coin flip. Fundamentals are rather bearish. 1555 is the 61.8% Fibonacci retracement of the recent move higher from the low 1527 and a move below 1550 might see further sell stops. 1576 is probably the next toppish level and direction might have to be drawn from the USD, where the DXY is forming a double top at the year high right now and only a sharp correction lower might prevent Gold from sliding further.