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1 : Daily Focus: ETFs prefer platinum 21 November 2011 Focus: With current market positioning already weak, the past week has seen relatively lacklustre interest in PGM. However, ETF buyers have been quite active, favouring platinum over palladium. In spite of finishing last week on a positive footing, the base metals have come back under pressure during Monday morning as a stronger dollar and weaker European equity markets weigh on sentiment once again. Aluminium has fallen below $2,100 ahead of US trade, while copper is again trading below $7,350 ahead of US trade. Volumes remain subdued, though zinc has started to see some good two-way interest build up. After a relatively stable Asian trading session, precious metals, along with the rest of the commodities complex, have come under selling pressure this morning. Once again, uncertainty concerning the Eurozone is rife, which is keeping the dollar relatively strong despite worries over the upcoming politicking regarding US deficit reduction plans. Strategists Walter de Wet, CFA* Walter.DeWet@standardbank.com Leon Westgate* Leon.Westgate@standardbank.com James Zhang* Jinzhong.Zhang@standardbank.com Marc Ground, CFA* Marc.Ground@standardbank.com Oil weakened further last Friday on continuous uncertainty over the Eurozone s sovereign debt situation. WTI and Brent lost $1.41/bbl and 66c/bbl respectively. Oil products fell slightly more than crude. Nevertheless, refining margins improved significantly over the last two weeks, which should provide some support to crude prices. However, there have been marked differences among different grades of crude oil. Commodity price data (18 November 2011) Base metals LME 3-month Close High Low Daily change Change (%) Cash Settle Change in cash settle Cash - 3m Aluminium 2,090 2,110 2,130 2, % 2, Copper 7,420 7,525 7,615 7, % 7, Lead 1,981 2,059 2,066 1, % 1, Nickel 17,810 17,655 18,160 17, % 17, Tin 21,350 21,275 21,590 21, % 21, Zinc 1,920 1,965 1,970 1, % 1, Energy Open Close High Low day/day Change (%) ICE Brent % NYMEX WTI % ICE Gasoil % API2 Q4' % ICE EUA Dec % Precious metals AM Fix PM Fix High bid Low offer Closing bid Change (d/d) EFP's Gold 1, , , , , /0.9 Silver /1.0 Platinum 1, , , , , /3.5 Palladium /1.0 Sources: Standard Bank; LME; BBG Please refer to the disclaimer at the end of this document.

2 Daily 21 November 2011 Focus: ETFs prefer platinum With current market positioning already weak, the past week has seen relatively lacklustre interest in PGM. However, ETF buyers have been quite active, favouring platinum over palladium. After three weeks of solid increases (the previous week saw 66.3k oz added), net speculative length for NYMEX platinum posted a rather muted increase this past week, with only 3.9k oz added. Encouragingly, the increase was the result of 9.2k oz being unwound from speculative short positions, with the 5.3k oz lost in long positions detracting from the overall improvement. Despite three weeks of decline, speculative shorts remain elevated (currently at 248.9k oz compared to last year s average of only 112.3k oz) and, along with a relatively disinterested market, a cause for concern. However, the apparent disinterest in the market position was not reflected at all in ETF holdings of platinum, which grew 38.6k oz this past week the strongest gain we ve seen since March this year. This brings holdings to 1,408.5k oz, and much closer to this year s high of 1,463.5k oz seen in early September. Net speculative length as a percentage of open interest increased again. Currently at 52.1% (50.9% previously), this is still comfortably below last year s average of 58.6%. Therefore, the platinum market still appears far from overstretched. For NYMEX palladium, net speculative length increased again, although at a much slower pace, with a 19.2k oz increase over the past week (43.8k oz were added in the previous week). The improvement in the net position was the result of speculative long positions added (27.0k oz). Some short positions were added (7.8k oz) ending five consecu- Platinum ETF Holdings k oz 1,600 1, Nov-09 Apr-10 Aug-10 Jan-11 Jun-11 Oct-11 Total ETF Securities Sources: Various ETFs; Standard Bank Research tive weeks of decline in speculative shorts, and softening the improvement in the net position. As for platinum, at k oz, total speculative shorts are still well above the 2010 average of 256.0k oz. While the addition of speculative longs is encouraging, the high level of speculative shorts is concerning. There is still some way to go before we would view the speculative market as convincingly more confident on palladium. A dramatic 41.7k oz were shed from ETF holdings over the past week. This marks the fourth week of decline, and by far the largest drop over that period. This underscores investors fragile confidence in palladium. ETF holdings of palladium are currently at 1,765.5k oz, a new low for the year. By Marc Ground Base metals In spite of finishing last week on a positive footing, the base metals have come back under pressure during Monday morning as a stronger dollar and weaker European equity markets weigh on sentiment once again. Aluminium has fallen below $2,100 ahead of US trade, while copper is again trading below $7,350 ahead of US trade. Volumes remain subdued, though zinc has started to see some good two-way interest build up. Chinese refined copper imports were kt in October, up 7.2% m-o-m from the kt imported in September. Scrap imports were down some 9.8% in m-o-m terms however, coming in at 377.5kt in October. In terms of the refined imports, some of the tonnage reflects the movement of metal from LME warehouses in the Asian region, where headline inventories have fallen 94 kt since the middle of September (32 kt from mid September to Mid-October). The stock trend is continuing with a 13,250 mt jump in cancelled warrants in Gwangyang this morning likely to herald further outflows in the coming days. This suggests that November s refined import figures are also likely to be pretty solid. LME on-warrant copper inventories in Asian warehouses currently stand at 40,975 mt, the lowest level in nearly 27 months. While this is taken as a positive sing in terms of Chinese physical demand for copper, it is more an indication of improving sentiment in terms of future physical demand, rather than reflecting actual conditions on the ground. The arbitrage is only open sporadically, while fears over the Eurozone and concerns over the Chinese property market are seeing Chinese participants sit on the sidelines. The result is likely to be a fairly significant recharging of bonded warehouse stocks in Shanghai, which should provide a bit of a cushion and help take the edge off anticipated Chinese demand, once it returns in force. By Leon Westgate 2

3 Daily 21 November 2011 Precious metals After a relatively stable Asian trading session, precious metals, along with the rest of the commodities complex, have come under selling pressure this morning. Once again, uncertainty concerning the Eurozone is rife, which is keeping the dollar relatively strong despite worries over the upcoming politicking regarding US deficit reduction plans. As expected, Spain will have a new government, although markets remain unsure of the political strength needed to adopt a severe austerity plan that will steer this country out the current debt crisis. Net speculative length increased again this past week, although only a marginal 9.1 tonnes were added (73.7 tonnes were added the previous week). The change in the net position was largely due to speculative longs being added (13.9 tonnes), with an increase in speculative shorts of 4.8 tonnes, detracting from the net improvement. Although only a marginal increase this week, the sustained improvement in the net position (now at tonnes), is a signal that the speculative market is showing a growing confidence in gold s prospects. ETF buying continued apace, with 28.2 tonnes added this past week. This brings ETF holdings to 2,418.7 tonnes, a new high for the year. The continued ETF support is encouraging, and underscores the growing confidence in the gold market. Net speculative length continued to climb, with a strong tonnes added over the past week. However, while the improvements of the past four weeks are encouraging, net speculative length, currently at 3,251.8 tonnes (compared to the 2010 average of 6,123.3 tonnes), still looks relatively weak. The increase in the net position was largely attributable to a tonne increase in long positions. Speculative shorts saw an unwinding of 24.4 tonnes. Market positioning remains weak, but there are growing signs that investors are becoming less bearish on silver. Gold support is at $1,697 and $1,690. Resistance is $1,723 and $1,744. Silver support is at $30.53 and $29.92, resistance is at $32.20 and $ Platinum support is at $1,551 and $1,540, resistance is at $1,588 and $1,614. Palladium support is at $586 and resistance at $605. By Marc Ground Energy Oil weakened further last Friday on continuous uncertainty over the Eurozone s sovereign debt situation. WTI and Brent lost $1.41/bbl and 66c/bbl respectively. Oil products fell slightly more than crude. Nevertheless, refining margins improved significantly over the last two weeks, which should provide some support to crude prices. However, there have been marked differences among different grades of crude oil. Distillate-rich crude is much more favoured than light crude, with high naphtha and gasoline yields. Dubai and Brent spread narrowed sharply over the past week, also as a result of strong distillate cracks but very soft gasoline cracks. Net for last week, front-month WTI and Brent fell $1.58/bbl and $7.54/bbl respectively despite strong economic data for the US. WTI better than Brent after Enbridge announced it would reverse the direction of the Seaway Pipeline, relieving some of the build up in crude at Cushing. The oil price was dragged down by worries about contagion from European sovereign debt. Rising bond yields in Spain and France worsened concerns that the European debt crisis would not be contained. The latest CFTC report shows that money managers raised their net length in WTI crude by 4.9% w/w (on a futures and options combined basis). The net increase was mainly driven by a sharp reduction in short positions, in particular, short positions in options, with few new long positions being added. Commercial hedgers net short positions jumped by 13.2%, as consumer long-hedging dropped much faster than producer short-hedging. Commercial hedgers have chosen the sidelines, because of very high market volatility. There is a policy void in Europe. The plan agreed to at the end of October appears to have made little progress, in particular, the Europe Financial Stability Fund (EFSF). This precarious situation will keep oil market volatility elevated. The physical crude market shows some signs of easing as the Brent structure continues to weaken. However, low oil inventories globally are likely to keep oil in backwardation, albeit not as steep as a few weeks ago. We only look for a substantial downside move in the oil flat price when the term structure is firmly in contango. Across the barrel, we favour middle-distillates despite their very strong rally during the past month, but we take a bearish view on light and heavy products. That said, we now see limited further downside in gasoline cracks after their recent collapse. By James Zhang 3

4 Daily 21 November 2011 Base metals Daily LME Stock Movement (mt) Metal Today Yesterday In Out One day change YTD change (mt) Cancelled warrants (mt) Cancelled warrants (%) Contract turnover Aluminium 4,557,325 4,560, ,950-2, , , ,022 Copper 395, ,250 1,025 3,300-2,275 18,425 37, ,742 Lead 373, , ,675-1, ,550 25, ,944 Nickel 83,940 84, ,732 4, ,472 Tin 13,325 13, ,950 1, ,147 Zinc 747, , ,600-1,600 45,975 46, ,723 Shanghai 3-month forward prices Energy COMEX active month future prices Metal Open Last 1d Change Open Close Change Change (%) Aluminium 16,070 16, Ali Mar' Copper 54,800 55, Cu Mar' % Zinc 15,095 15, ZAR metal prices Aluminium Copper Lead Nickel Tin Zinc ZAR/USD fix Cash 17,028 61,911 16, , ,935 15, month 17,452 62,239 17, , ,966 16, Energy futures pricing Price Change Price Change Price Change Price Change Price Change 1 month 2 month 3 month 6 month 1 year Sing Gasoil ($/bbbl) Gasoil 0.1% Rdam ($/mt) NWE CIF jet ($/mt) 1, , , , , Singapore Kero ($/bbl) % Rdam barges ($/mt) % Fuel Oil FOB ($/mt) Sing FO180 Cargo ($/mt) Thermal coal Q4-11 Q1-12 Q2-12 Cal 12 Cal 13 API2 (CIF ARA) API4 (FOB RBCT) Precious metals Forwards (%) 1 month 2 months 3 months 6 months 12 months Gold Silver USD Libor Technical Indicators 30-day RSI 10-day MA 20-day MA 100-day MA 200-day MA Support Resistance Gold , , , , , , Silver Platinum , , , , , , Palladium Active Month Future COMEX GLD COMEX SLV NYMEX PAL NYMEX PLAT DGCX GLD TOCOM GLD CBOT GLD Dec'11 Mar'11 Jan'12 Jan'12 Dec 11 Oct'12 Dec'11 Settlement 1, , , , , Open Interest 466, ,002 19,649 39,179 7, ,730 1,864 Change in Open Interest -2,237 1, Sources: Standard Bank; LME; Bloomberg 4

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