Precious Metals Report- Wednesday, Dec.

19, 2012
Written by Edward Meir Tel: +1-203-656-1143 Email: edward.meir@intlfcstone.com

Report Date

18-Dec-12

OTC
New York Close Asia Open High Bid Low Offer New York Close Daily Change USD Daily Change % London Fixings AM PM

Gold
17-Dec-12 18-Dec-12 18-Dec-12 18-Dec-12 18-Dec-12 $1,697.40 $1,697.00 $1,702.80 $1,669.90 $1,669.90 -$27.50 -1.62% $1,699.50 $1,694.00 $1,670.70 $1,698.30 -$27.60 -1.65% 0.80/1.10

Silver
$32.2300 $32.2500 $32.5200 $31.5800 $31.6190 -$0.6110 -1.90% $32.3800

Platinum
$1,608.25 $1,607.00 $1,614.50 $1,593.70 $1,593.70 -$14.55 -0.90% $1,610.00 $1,611.00 $1,593.70 $1,608.50 -$14.80 -0.93% 0.00/1.00

Palladium
$698.05 $696.00 $700.75 $690.80 $690.80 -$7.25 -1.04% $700.00 $697.00 $690.95 $698.30 -$7.35 -1.06% 0.15/1.15

18-Dec-12 18-Dec-12 18-Dec-12 17-Dec-12

COMEX/NYMEX
Active Month Previous Daily Change Daily Change % EFP's $

18-Dec-12 18-Dec-12 04-Dec-12 18-Dec-12 18-Dec-12 18-Dec-12

$31.6690 $32.2800 -$0.6110 -1.93% 0.05/0.07

OTC Forwards & Options

GOFO SIFO USD LIBOR Gold ATM Vols Silver ATM Vols

1 Month
0.34200% 0.70000% 0.21070% 11.00% 21.25%

3 Months
0.39400% 0.65000% 0.30900% 12.25% 22.50%

6 Months
0.46000% 0.60000% 0.50850% 14.00% 23.50%

12 Months
0.49200% 0.50000% 0.84250% 17.00% 25.50%

The information contained in this table has been taken from trade and statistical services and other sources which we believe to be reliable. INTL FCStone does not guarantee that such information is accurate or complete and it should not be relied for pricing and/or trading decisions.

General Commentary: Written on Tuesday, December 18, 9:00 p.m. US East Coast time). Gold fell by about 2% on Tuesday to its lowest level since August, hit by a wave of selling triggered on growing hopes that a fiscal fix is coming through after all. If this does indeed happen, the attraction of holding gold should wane (theoretically), as any agreement that restores at least $2-3 trillion of both revenue increases and spending cuts over the next 10 years would be an important step in getting the USs fiscal house in order. There is, however, one problem with the cause-effect dynamic between a healthier US balance sheet and weaker gold prices, and that is that this relationship has not always been consistent. In this regard, we have seen instances in recent weeks where gold rallied when the two sides in Washington were making progress on the talks, but proceeded to sell off when the talks floundered, exactly the opposite of what we saw happen on Tuesday. Perhaps sentiment this time around is changing, as investors may be sensing that with only 12 days left, both parties have their backs against the wall and need to come up with a deal. The latest positions in the talks are not that different from what we outlined in Mondays note; President Obamas plan would raise $1.2 trillion in taxes over the next decade on those making $400,000 a year or more, and cut $1.22 trillion in spending, including a measure to reduce Social Security cost-of- living increases that theoretically should trim outlays by $130 billion over 10 years. The administration is also asking for a two-year extension on the debt ceiling.

Singapore INTS: +656309 1010 / Dubai INTA +9714 447 8510 / London INTM +44 20 7220 6010 New York INTL +1 212 407 5102 / Orlando INTO +1 407 741 5332 Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures, options on futures contracts, or OTC products. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy.

PRECIOUS METALS REPORT - PAGE 2

For his part, Speaker John Boehner told reporters he is hopeful that a compromise will be reached, but added that President Obama has yet to offer a plan that makes sense. Boehner said his calculations show that Obamas latest offer is for $1.3 trillion in tax increases and $850 billion in spending cuts, and insists that more needs to be done on the latter side. More importantly, Boehners tax cut-off is at the $1 million mark. Should the impasse persist, the speaker has announced that he is prepared to proceed with Plan B, which would involve voting on legislation that would extend current tax rates for all people earning $1 million or less a year and deferring spending cuts and entitlement reform to a later date. A vote on this is schedule on Thursday by the House, but it will likely go nowhere in the Democratically-controlled Senate. The proposal was also rejected by the White House which, incidentally, put up a similar proposal a few weeks ago when it urged the House to vote and approve a tax increase on those making $250,000 or more, a measure that already passed in the Senate. Whatever the case, Tuesdays bearish action in gold, coupled with the bullish action in US equities, suggests that investors are expecting a deal as being more likely than a failure. If we do get a deal, we may see one more final sell-off in gold that could conceivably take the complex down to $1650 and possibly down to $1630, both next support levels on the charts. Technicals also suggest we have more room to go on the downside. In this regard, although golds RSI is at an oversold level of 35, it is still not in extreme territory. Moreover, gold is dangerously close to its 200day moving average of $1663, and although it briefly took it out on Tuesday before snapping back, we would not rule out another test (and break) on a subsequent attempt. With regard to US macro news, a December confidence gauge rose in December to its highest level since April 2006, with the National Association of home builders housing index rising to 47 from a downwardly revised 45 in November.
Gold Nearby Continuation

Support levels at $1650 and $1630

RSI readings- gold still not severely oversold

Silver Nearby Continuation

The $30.50 level seems to be next support on silver (red line).

Palladium Nearby Continuation

Palladium may be on the verge of taking out its uptrend line (in blue).

Platinum Nearby Continuation

Source for Charts: Esignal/Futuresource.com

Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures, options on futures contracts, or OTC products. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy.

PRECIOUS METALS REPORT - PAGE 3

Out of Europe, ECB chief Mario Draghi said that the central bank expects a beginning of a recovery in the second part of next year. There was even good news out of Greece for a change, with Standard & Poors lifting Greeces bond rating from selective default to B- with a stable outlook, with the rating agency citing the package that was approved earlier in the month and the stated resolve of the Europeans to stand behind the country. Both items played a part in strengthening the Euro, which soared to a high of $1.3238 on Monday, although it did little to stem the sell-off in gold. In other news, HSBC raised its platinum price forecasts for 2013 and 2014 citing a supply deficit in the complex. The bank increased its 2013 average forecast to $1,710 an ounce from $1,625 and sees the metal averaging $1,800 in 2014. Right now, we are higher in the precious group, with gold up by about $4/ounce, but we suspect we could see the market weaken again, particularly if the two sides in Washington continue to make progress. Base metals are down slightly, as so is energy. The Euro is a touch weaker, as is the yen, now pushing towards 84.50 against the dollar.

Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures, options on futures contracts, or OTC products. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy.