Tuesday, 17-October-2006
Gold firmed during access trading, but drifted slightly lower priorto Tocom opening. The yellow metal traded within a narrow two dollar range,supported by bids below $596 and restricted by offers above $598 per ounce.In Europe the market retreated to fix at $594.90 on the AM London fixing.Subsequently the prices rebounded, but still remained rather inactivedespite a weaker US dollar and crude trading above $62 per barrel.
Oilfirmed for a fourth consecutive session today ahead of the OPEC meeting andafter the forecasts of a relatively cold winter in United States. Theprivate weather forecaster EarthSat Energy WeatherWinter said today thatthis year’s winter in US would be five percent colder than last year’s,which has the potential of increasing demand for heating oil and naturalgas. The upside in crude however remains limited by the high inventorylevels. Meantime OPEC ministers continue to disagree on whether to cutoutput from the actual production of about 27.5 million bpd or from theirnominal 28 million bpd ceiling. The group’s credibility was harmed by theslowness to act with the emergency meeting taking place tomorrow in Qatar.After the opening of the Comex trading session the US producer prices sentmixed signals underlining the difficult task that the Federal Reserve isfacing ahead of its October 24-25th meeting. US producer prices fell by amuch larger than expected 1.3 percent in September verses 0.7 projected,representing the steepest decline since April 2003. According to the reportthe drop was due to the record drop in gasoline prices that fell 22.2surpassing the fall of 22.1 percent in March 1986. The core prices hadhowever posted a stronger than anticipated 0.6 percent gain last month,which according to the government report was due to the sharp recovery incar and light trucks. .
Passenger cars experienced its largest put on in 16year while light motor tracks its sharpest since October 1985. The preciousmetal lost ground after the release of the figures to extend the low to$593.3, but rebounded after the second set of US economic data. The US netinflows of capital into the country surged to a record $116.8 billion inAugust, well above the record trade deficit that month. The US industrialoutput had however tumbled 0.6 percent in September verses a fall of only0.1 percent estimated. The initial partial recovery of the losses was shortlived as spot tumbled down to $590 and that is where it started trying onthe second London fix. Prices went trying as low as $588.90 where sellersturned into buyers pushing the prices to try as high as $590.60, to finally20 minutes later fix where we started, at $590.00. The yellow metalhesitated around the $590 support level for a while before plunging furtherdown, extending the low to $586.50. The precious metal hovered around thebottom side of the intraday range before closing just above the $590 level.We believe that gold will remain bounded by a wide $570-602 range in theshort term with a further retreat not being ruled out before heading up tothe $600 psychological resistance. .
Silver was also very quiet in Asia as some good two way businesscould not bring us above $11.85 or below $11.83. During the Europeantrading hours spot revisited the overnight lows before fixing at $11.85 inLondon, up 13 cents from the previous one. The prices then continued theirway on the upside to unsuccessfully challenge the $11.90 resistance priorto the opening of the Comex division of the New York Mercantile Exchange.During the NY trading hours the white metal at first resisted the downwardpressure from softening gold, but ended up joining the descent. Prices hitthe low of $11.58 by the late afternoon and had difficulty re covering tofinally close at $11.725. We believe that silver will continue mirroringgold moves and for the short term remain restricted by the $11.50-12.00range. If the $11.50 level fails to hold, we might revisit the $11.00 majorsupport.
MKS Gold & Silver, Daily Report
by Lidia Nazarova
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