Range Asian Hours (from Globex open)

GOLD SILVER PLATINUM PALLADIUM

OPEN 1308.00/40 20.68/71 1476/79 879/81
HIGH 1308.00/40 20.72/75 1479/82 879/81
LOW 1301.60/00 20.55/58 1474/77 875/77

MACRO: Markets remain on the front foot for now with the USD generally strengthening across the
board and equities still trading just off all time highs. In the US the earning season is doing well,
with 77% of companies to date reporting positive surprises, but a few negative surprises on Friday
did lead US equities to round out the week on a softer note, eroding the gains carved out
throughout the week. U.S. indices closed broadly lower Friday with consumer discretionary stocks
hammered after late news Thursday of a disappointing earnings result from Amazon (-9.6% on
Friday) and a down-beat outlook from Visa Inc. The Dow Jones Industrial Average dropped -123.23
points, or -0.72%, to 16,960.57 on Friday with Visas -3.6% retreat accounting for somewhere
around 50 points of that decline. The S&P 500 index was also lower off -9.64 points, or -0.48%, to
1,978.34. Losses for discretionary (-1.2%), utilities (-0.8%) and energy (-0.8%) led the way lower
while teleco's (+0.25%) and materials (+0.2%) were the only winners on the day. The Nasdaq
Composite Index fell -22.54 points, or -0.5%, to 4,449.56. US treasuries climbed after a report on
durable goods showed weak underlying trends, in turn pushing benchmark yields lower for their
third consecutive week. The 2y note yield shed -0.3bps to 0.488%, while the the 10y bond yield fell
-3.9bps to 2.464% retreating from 2.500% resistance earlier in the week.

On the data front orders for durable goods rebounded in June to +0.7% MoM (+0.5% estimate) after
sinking -1.0% in May. One closely watched measure of business investment - orders for non-
defense capital goods, excluding aircraft - jumped +1.4% MoM (+0.5% expected) after sinking a
downwardly revised -1.2% (-0.7% prior). Shipments of those goods fell -1.0% following declines
both in May and April. An uptick in capital-goods shipments was supposed to be part of the
anticipated second-quarter bounce in economic growth, said one chief economist. Across the
Atlantic, German IFO business sentiment slid markedly in July. The IFO index fell to 108.0 (109.4
expected), a nine-month low from 109.7 reported in June, with concerns about geopolitical risks
cited as a key factor behind the decline. Sentiment weakened across most sectors, hitting
wholesalers and retailers as well as manufacturers. The scale of decline came as a surprise
according to IFO economist Klaus Wohlrabe who said, "Tensions are weighing on the mood in
general", adding that the influence of the conflicts in the Middle East and Ukraine could not be
measured in 'concrete' terms. Finally from China over the weekend the National Bureau of
Statistics (NBS) in China announced that industrial profits (including all industrial companies with
annual sales from principal business exceeding 20 million yuan) picked up moderately to +11.4 ytd
by the end of June, from +9.8% ytd by the end of May, but still lower than +12.2% for 2013. For the
monthly figures, industrial profits turned up strongly by +17.9% in the month of June, accelerating
from +8.9% in May. The datas market impacts were limited however and the G10 currencies
started the week in line with levels seen at Fridays NY close.

Looking ahead it is a busy week for data releases. US Q2 GDP growth (Wed) is expected to come
in at a healthy +3.0% QoQ annualised following a -2.9% decline in Q1, supported by consumption
and investment. Another strong non-farm payroll number (Fri) at +231K is expected while July ISM
Manufacturing index (Fri) should have edged up as well. Meanwhile, it is unlikely that there will be
any surprise at the FOMC meeting on Wednesday with another $10bn taper expected and no post-
announcement press conference yet scheduled. Flash Eurozone HICP inflation is expected to have
remained unchanged at +0.5% YoY but this number had been expected to stay very subdued in
2014. If this comes in as expected it will unlikely add to arguments for the ECB to launch an asset
purchase programs unless we see a big down-side surprise.



PRECIOUS: After falling some -1.5% between Monday and Thursday last week gold gained some
traction on Friday, knocking out some weak shorts through $1300 and closing the session and
week at $1308 (a weekly loss of only -0.3%). Following Thursday's sell off and second rejection of
the 200 dma ($1286.10) gold looks to continue to range trade in the interim between $1290-1320.
Geopolitical factors in Ukraine and Gaza should continue to support gold in the short term,
particularly if matters worsen on either of these fronts. However, with a swathe of key US data out
this week that is generally expected to be quite robust, gold may run into further selling from macro
and producer type customers later in the week. According to Bloomberg hedge funds had increased
their bullish bets on gold in the week up to the end of 21 July with the net long position on Comex
for futures and options jumping by +3.1%. This was before the sell-off last week however. Over the
same period in contrast holdings of the SPDR ETF, the world's largest gold backed ETF, dwindled
and continued to do so up until last Friday. According to the SPDR website holdings fell -3.59
tonnes in the corresponding period and another -3.3 tonnes in total last week. Total holdings now sit
at 801.84 tonnes as of last Friday. Elsewhere, South Africa's Rand refinery, one of the worlds oldest
precious metals refiners, disclosed that they had discovered an 87,000 oz deficit in their gold stock
which has been attributed to the adoption of a new computer system. The error is worth in excess
of USD $113mil, with major shareholders including AngloGold Ashanti lending the company the
USD shortfall. The full report can be found here:
http://www.mineweb.com/mineweb/content/en//mineweb-gold-news?oid=248527&sn=Detail.

Silver had a strong bounce back on Friday clawing back +1.75%, after testing down towards the
200 dma ($20.26) in previous sessions. The grey metal posted a high of $20.76 last Friday and
closed the week out just shy of this. PGM's were lower last week but there is still notable buying on
dips for both Pt and Pd based on fundamental factors ie. imposition of sanctions on Russia and a
cut of global supply.

ASIA TODAY: Asian profit taking was evident from the get-go this morning with gold falling beneath
$1305 fairly quickly but then recovering as the Tocom open approached. Volumes were a little
lower than normal in early trade, most likely a result of a number of regional holidays taking place in
Singapore, Indonesia, Malaysia and the UAE. Japanese traders were sellers on the Tocom open
happy to trim longs and lock in some profit after some decent buying was seen last Friday. Chinese
traders opened in the same way, happy to sell into the higher prices. It was a very slow grind lower
throughout the morning and middle of the day down to the days low at $1302.00. Some large
iceberg orders on Ecomex beneath $1302 were tested a number of times but they proved to be
quite substantial and buying stepped in ahead of this as a result. Trading volume picked up towards
the days lows with snippets of retail interest seen along with some intra-day profit taking helping the
xau price recover all the way back towards $1307. In other markets the Shanghai composite was
strong following the positive weekend data up +2.1% on the day, the Nikkei was up +0.4%, Hang
Seng +0.9% and All Ords -0.1%. The USD was mostly flat, WTI crude was softer at 101.55 a barrel
(-0.55%) and base metals were slightly firmer. Ahead today look out for US composite and services
PMI's, pending home sales and Dallas Fed manufacturing activity. All the best.



Alexander THORNDIKE - Senior Precious Metals & FX Dealer

MKS (Switzerland) SA
PROMENADE ST-ANTOINE 10 1204 GENEVA
MAILING ADDRESS:P.O BOX 3470 1211 GENEVA 3 SWITZERLAND

GVA TEL +41 22 818 52 00 FAX + 41 22 810 13 82
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E-MAIL athorndike@mkscapital.com.au WWW.MKS.CH