“Bullish sentiment for Gold"
Gold moved in an upward trend last month, which brought prices from a minimum of $1,084/oz to $1,192/oz, with a hike of more than $100. Although the news released in Friday 04/16/2010 that brought down Gold of $23 ca (the U.S. government has accused Goldman Sachs of defrauding investors by failing to disclose conflicts of interest in mortgage investments), the trend remained Bullish . Next week, indeed, we have witnessed a substantial increase, +3.0% ca ($34). The worrying situation in Greece, has heavily influenced the trend of Gold, that has been interested by a massive demand for investment. Indeed, the amount of Gold, held by ETFs, increased by 48 tons ca last month (1808 Tons on 04/06/2010-1856 Tons on 05/05/2010 –www.italpreziosi.it / Update Gold ETFs). Gold particularly strengthened against Euro, reaching the all time high in the 06/05/2010 to €962/oz; in the 04/05/2010, Gold has also reached the all time high against Yen to ¥112.000/oz. While the demand for investment of Gold as safe haven, is to note the decrease in consumption of gold for jewelry which, according to official statistics released by GFMS, dropped from 2,193 to 1,759 tons last year, with a decrease of 24% ca. From a financial standpoint, Net Long Position at COTR have approximately risen of 22.5% in the last month, from 24 to 29.4 million Ounces ca, confirming the Bullish Momentum. The strength of Gold is more evident against Euro, with a continue reaching of new all time highs, while against Dollar it rises more gradually. Despite this, the forecasters of the LBMA, believe that Gold could reach $1.394/oz in the 2010. The component of safe haven of Gold, is keeping high interest in the Yellow Metal, even if they could see in the Dollar the first beneficiary of risk aversion. We believe that in the medium-long term, Gold trend remains upward. In the short-term, Gold is likely influenced by the future of Greece, because the bailout affirmed by the EU, has shown low confidence in the Euro-zone and brought Gold, against Euro, to new all time highs. The Euro situation added great fear in the market, so Gold reached, against Dollar, the new maximum of 2010, $1210/oz.
“Supported by rising industrial demand”
In the wake of Gold, Silver is continuing its long-term uptrend. The Silver continues to outperform Gold, on expectations of an economic recovery that should see improved industrial demand. At the contrary, we could note that the demand for investments is decreased: the quantity of Silver Trust (iShares), has fallen from 9,492 to 8,913 Tons in the last three months, confirming a loss of appeal as investment metal. From a financial standpoint, we can appreciate a significant increase, 22%, of Net Long Positions at COTR, from 242 to 295 Million Ounces ca. Contrarily the other industrial metals like Copper and Aluminum, Silver has shown more vigor, boosting performance in the last three months. In the short-term we estimate a possible increase in prices, that could reach $19/oz.
“Uncertainty and fear:Greece will be saved?”
After a sideward trend persisted for several days, fluctuating between $1.31 and $1.37, Eur/Usd Cross seems to have taken a direction: downward. Afterward have moved sideways mainly because of uncertainty about the macro-economic European future, Euro started a sharp depreciation against the U.S. currency. The decision reached by member countries to help Greece, has not reduced fear in the market as hoped. Initial €45 Billion of Euro in loans at below market rates thought, have had a deep change: have been allocated, indeed, €110 Billion of Euro and it seems not sufficient, because it is probable that Greece needs €144 Billion of Euro ca. However, the downgrade of the Greek debt to "BBB-" by Fitch, has brought more fear and volatility in the market. Indeed, "BBB-" is the lowest level of investment in Bonds allowed to many asset managers (specifically pension funds); if it occur a further downgrade of the debt, we could probably assist to other sales of Greek bonds. In recent days, the European Union is in choppy water; to make things worse, S&P revised downwards to "AA" the rating of Spain; besides, market rumors say that the Iberian country, together with Portugal, might require financial support in the coming months, because of their troublesome sovereign debts situation. On the American front, however, come partially positive news: the U.S. economy seems to be slightly recovering, with improved industrial and unemployment data (Chicago Purchasing Manager at 63.8 vs. 58 prior - Michigan Confidence at 72.2 vs.69.5 prior - Personal Consumption at +3.6% vs.+1.6 prior - Request for Unemployment Benefits to -2.4%).The Obama administration has also reached a historical goal: the Health Care Reform. The American economy could substantially benefit from the reform: new government spending, indeed, could mean more than GDP (even if with a greater debt). The extension of health care to other 32 million of Americans, could likely create more jobs, new infrastructures and increase production of pharmaceutical sector. In the short term, we believe that Euro could decrease; this fall can probably continue in the medium term.