Monday, 16-October-2006
After a close below $590 per ounce on Friday, gold traded higher toopen around $592 levels on Tocom. Large volumes were traded in Asia, butthe volatility was small and the metal bounded by less than a three dollarrange. In Europe the yellow metal fixed at $593 on the first London fixing,up 15.1 dollars from the previous AM one.
Subsequently the pricesexperienced some downward pressure as oil dropped towards $58 a barrel onthe news of Royal Dutch Shell could be restarting its 80,000 barrels perday Draugen oilfield earlier than expected. OPEC stated today that the oilprice weakness is likely to persist due to the slowing economic growth ofthe world’s top energy consumer US, slowing demand growth, rising non-OPECsupply and high inventory levels. The above factors add to the urgency ofthe OPEC meeting to settle the details of the output cut, which is itsfirst reduction plan in two years. Ministers from the Organization ofPetroleum Exporting Countries are due to meet on Thursday in Qatar afterover two weeks of uncertainty of how to cut a million of barrels per day ofsupply. The cut from quotas would spare member such as Venezuela, Iran andIndonesia as soon as they are already pumping under the established outputlevels.
OPEC expects the demand for its crude to fall next year to 28.08million bpd from 28.72 million bpd in 2006. Spot briefly dipped down the$590.50, but gradually recovered all the losses and traded nearly fivedollars higher. The peak of the day was set up on the second London fix, at$595.10. The precious metal very quietly traded within $592/595 range formost of the session until the high was extended to $595.8 minutes beforethe close. We believe that gold might have the possibility of challengingthe $600 psychological resistance if the $590 support is sustained. Strongphysical demand continues to act in favor, but a drop in oil prices mightforce the yellow metal to retreat.
Silver was well bid in the Far East, but failed to break above the$11.70 resistance. The break higher was however successfully managed on thefix after a boring ten cent range trading in the morning. The white metalfixed at $11.72 and continued its ascent after the opening of the Comexdivision of the New York Mercantile Exchange. The prices hit a one monthhigh of $11.88 and remained hovering on the upper side of the intradayrange for the rest of the NY session. We believe that silver might beheading to the $12 psychological resistance level if the $11.90intermediate resistance is conquered.
MKS Gold & Silver, Daily Report
by Lidia Nazarova
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