Monday, 23-October-2006
After a close above $593 level on Friday, gold was sold down onaccess, to opened more than three dollars lower in Asia. Buying on Tocompushed the metal up to $592.50, but in the absence of any follow through itremained hovering within a one dollar range. In Europe the yellow metalopened around $592 levels, which marked the high for our time zone as soonas from there the prices started their gradual descent.
Gold fixed at$588.50 on the first London fixing, down 9.5 dollars from the previous AMfix. Lower oil prices and still strong US dollar weighed on the preciousmetal. The decline in crude oil futures was triggered by doubts over thecommitments to the plan by the Organization of Petroleum ExportingCountries to cut 1.2 million barrels a day. More alarming for the marketshowever is the fact that according to last week’s CFTC Commitments ofTraders report, non-commercial positions on Nymex, had turned net short forthe first time since March. The doubts about the willingness of the OPECexporting countries to forgo oil revenues helped to weaken investor’sbullish sentiment. Oil prices are down about 25 percent since July whilegold fallen nearly 20 percent over the same period of time. The market wasvery quiet as many participants remained sidelined ahead of the US FederalReserve meeting this week. The US central bank is widely expected to leaveinterest rated unchanged, at 5.25 percent, but the attention will befocused on the accompanying statement and what the Fed will say about thereceding inflationary worries. Spot hit $582.50 per ounce during the Comextrading hours and fixed 25 cents above the low on the second London fix.Subsequently the market rebounded slightly to remain stagnant in a $583-586range until minutes before the close the low was further extended to$579.7.
The strong seasonal physical demand seems to be not enough to take usabove $600 level, which we constantly failed to sustain since the middle ofSeptember. We believe that gold will remain imprisoned in a range below$600 for the short term, as the metal lacks momentum and a clear direction.A further downside correction cannot be ruled out though as weak oil pricescontinue to exercise pressure.
Silver was also sold on access to open around $11.77 levels on Tocom,down roughly 15 cents from the NY closing price Friday. Spot tried tochallenge the upside without success as large offers accumulated above$11.90 resistance. In Europe the white metal followed the same scenario asgold. It gradually lost ground from the high of $11.88 seen in the earlymorning to fix 17 cents lower in London. After the opening of the Comexdivision of the New York Mercantile Exchange the low was further extendedto $11.60. For the rest of the session the market remained very quiet withthe prices hovering around the bottom side of the intraday range. Webelieve that silver will continue mirroring gold’s moves and mightexperience a further downside correction before targeting the $12resistance.
MKS Gold & Silver, Daily Report
by Lidia Nazarova
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