Thursday, 25 May 2006
Straight after the markets closed Wednesday the prices slipped to$635 levels on access, but recovered above the $640 important support bythe opening of Tocom.
Gold was trading in a very tight four dollar range inAsia and had a quiet overnight session for a change. In Europe the metalgot back to its volatile trading conditions bouncing at first up to $648and retreating down to $640 which still remains a very narrow for thesedays range. Gold fixed at 643.75 on the AM London which is more then 23dollars lower compared to the one of yesterday. The mixed US economic datathat came out after the Comex opening did not help the market to find amore clear direction. The US initial jobless claims fell to a seasonallyadjusted 329 thousand in the week ended on the 20th of May compared to anupwardly revised 369,000 claims for the week before. The numbers werehowever still higher then the expected 315 thousand. The Labor Departmentstated that the decrease was influenced by a sharp drop in the claims fromPuerto Rico which were provoked last week by a partial government shut downdue to a funding crisis. The first quarter US GDP came out to be at 5.3percent annual rate which is also below expectations, but still expressesthe fastest growth in more then two years. Much of the upward revision ingrown can be accounted by a sharper build up in inventories andstrengthened exports. The GDP report however anticipated a slower futuregrowth due to a slowed down real disposable personal income and personalconsumption spending. The price action calmed down after the second Londonfix of $642.50 and the metal spent most of the day quietly trading theintraday range. By the late afternoon the inflow of buying interest aheadof the long weekend pushed the prices higher extending the upside to $651,but failing to uphold the gains. The yellow metal closed at $648/9 perounce.
We believe that after a fall from the high of $730 seen on the 12thof May of nearly 100 dollars provoked by profit taking and fund selling, itis difficult to remain bullish about the gold market. The metal is stillundergoing a consolidation phase with a further pullback not being ruledout if the selling pressure persists. A failure to sustain the $640important support level could mean a move back to $620-600 area. We expectthe market to stay volatile due to the uncertainty in the outlook for theUS interest rate policy along with the dollar as well as a lack ofliquidity. The metal needs to settle down and stabilize before anysustainable gains could be acquired with the $675 remaining a majorresistance on the upside. For the short term we see gold trading within$640-660 range.
Silver spent the Asian session trading in an unrealistically narrowfor these days range which was widened a bit in Europe. The metal fixedlower at $12.57 today compared to $12.80 on Wednesday. The spot was atfirst enclosed within the $12.30-12.78 range of very quiet pricefluctuations. The metal broke higher in the late afternoon following thegold’s upside move to extend the day’s peak to $ 12.82/oz, but closed 22cents below it. We believe that silver might experience a further pullbackif the gold’s weakness was to persist. The bearish tone is also supportedby the first outflows from the silver ETF. The inflows into the fund wereat first responsible for the sharp price increases which brought to a highof $15.17 on the 11th of May. According to UBS after three days of failingto report any growth, the silver ETF saw an outflow of 2.5 million ouncesof metal in trust yesterday. For the short term we see the metal wellsupported by the $12 level with $13 acting as a first resistance.
Please note that the NY session will have an early close tomorrow, at18.10 Geneva time. The markets will stay closed on Monday for a MemorialDay in US and a Bank holiday in UK, so our Geneva office will also beclosed.
MKS Gold & Silver, Daily Report
by Lidia Nazarova
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