Standard Bank: Despite Gains, Gold Not Yet Pricing QE3
A consensus around the headlines this week has been that, on renewed anticipation of QE, gold and silver are therefore showing gains.
But, in their daily report from 24 August, Standard Bank suggested that gold had not yet appreciated in anticipation of easing:
Gold is consolidating above its 200d MA. We don’t believe gold is pricing further QE
yet. Firstly, gold has rallied even ahead of the release of the FOMC minutes and is
currently only around $20 higher than it was Wednesday afternoon before the minutes
were released. Secondly, we’ve been estimating fair value for gold at $1,650 – a
level we’ve been targeting from around mid-May
Although the bank is currently long gold, it has yet to turn bullish on silver, however, noting that silver over-appreciated when compared with gold and their historical price correlations:
Silver, however, has not seen any supply disruptions and
should on average have moved by less than 5% given gold’s
move in the past few days (compared to the actual 9% we’ve
seen). Silver is clearly an outlier here, rallying almost as much
as platinum and palladium in the absence of supply issues.
Standard Bank believes that a gold/silver ratio that has gone from 58-1 to 54.7-1 must correct in the near term.
The notable part of the report, however, is the idea that gold is not yet pricing quantitative easin3. Psychologically, it seems that market participants certainly do believe QE is likely in the near future, and so therefore demand has been affected over the past week. But, Standard Bank seems to imply that much larger gains would be betokening of a fear-driven gold run in price, and these gains are not those gains.