After Tocom being limit down yesterday, gold was bid up in Asiaencountering some resistance at $700, but making its way through to see$708.00/oz traded.
The metal closed the Far East session on a solid noteand continued its way up in Europe firming further on currency relatedbuying to trade at $719. Subsequently gold retreated six dollars on thefirst London fix, but up $32 compared to the previous AM fix. Spot extendedlosses to $705 once the NY session opened, but firmed again after worsethen expected US economic data was out, bouncing up to $712.50/oz. Theconsumer prices came out up 0.6 percent on a big jump in energy costs. Themain focus of the Federal Reserve was however on the core prices which haverisen 0.3%.
It brings the year-over-year number to 2.3 percent with thisreading being the highest since March of last year. The above datapreserves a real possibility of the potential of higher inflation as soonas the increase mainly reflects labor costs and risks maintaining thespeculation of the Fed rising interest rates again in June. Gold could notsustain the gains for long and collapsed at first down to $696.50.
Themarket looked confused after that with prices making sharp rebounds andretreats within minutes in very illiquid conditions and mostly fund driven.The weak PM London fixing propelled further fund selling and prices hit$686.50/oz. The move was helped by the US currency strength after theannouncement of the French finance minister who stated that everythingshould be done in order to prevent the euro strengthening too much againstthe US dollar. The metal only fractionally recovered the intraday losses toclose at $692/3.
We believe that gold remains vulnerable to sharp price moves in thisvery choppy and illiquid market with a possibility of another dive lowerbefore further gains could be acquired. Even if there is still potential onthe upside we think that if the spot breaks below the $675 level we mightsee the prices retreating back to the $600 mark.
Silver also extended gains overnight compared to the NY close priceTuesday. The metal challenged the $14 level in Europe, but could notsustain it and experienced a sharp fall in prices on aggressive profittaking from $14.05 to $12.94 following the gold’s corrective retreat. Themetal was mirroring the gold’s moves throughout the day, lacking a cleardirection. We believe that for the short term the white metal will betrading sideways within a wide $12.90-14.10 range with the vicious spiralof illiquidity, volatility and declining volumes set to continue.
Platinum prices soared to a new all time high of $1,340 today helpedby a general commodity market strength following the downward healthycorrection, but ended the day lower influenced by a sharp fall in theprecious metals.
MKS Gold & Silver, Daily Report
by Lidia Nazarova
Disclaimer
