Monday, 5-March-2007
Tocom once again opened limit down with gold initially getting somesupport from the physical buying interest. Japanese and Hong Kong traderswere however happy to sell the rally capping the market at $644.50. Theweaker euro currency also helped the yellow metal to come off.
Spot shortlydipped below the $640 support level and settled just above it. In Europethe price action remained limited. The precious metal retreated back belowthe 640 dollar mark and continued to gradually lose ground. It waspressured by crude falling over a dollar below $61 per barrel as a slide instock markets spilled over into commodities. Growing concerns of economicdownturn reducing demand for oil in the two world’s top consumers, US andChina, also weighted on oil. Selling across commodities complex waspartially driven by the need of funds to raise cash to pay for losses inother asset classes as well as a surge in the Japanese yen as investorsunwound a carry trade that has driven many recent investments. A carrytrade in this case is borrowing yen due to the low interest rates in Japanand using the money to invest in high-yielding currencies and assets.Market participants are now turning to less risky bets as interest ratesare rising in Japan and fears of a slow down in the US economy are growing.Many however continue to believe that crude fundamentals are very solid andthat falling inventories and geopolitical concerns will provide supportdespite the OPEC’s most probable decision not to further cut output at thegroup’s next meeting on the 15th of March in Vienna. “I think $60 is a gooddeal for everybody, for producers and consumers” Qatar’s oil ministerAbdullah bin Hamad al-Attiyah said today. Prices fixed at $638.60 on thefirst London fixing, down 25.4 dollars from the previous AM. The marketremained bounded by a fairly narrow range until the opening of the Comexdivision of the New York Mercantile Exchange. Subsequently spot plungedsharply lower, hitting $633.30 per ounce on continuing speculative longliquidation, its lowest in six weeks. The only US economic data due todaywas the release of the Institute for Supply Management’s services index andit appeared to be worse that expected. The index slid to 54.30 verses 57.20forecasted. A number above 50 still indicated growth in the service centerwhich accounts for about 80 percent of US economic activity. The yellowmetal then rebounded to fix over three dollars above the lows and extendedthe high to $642.60. The gained could not be sustained for long though andthe metal spent the last couple of hours of trade hovering on both sides of$640. We believe that gold will continue following crude oil fluctuationsand remain supported by the geopolitical tensions, inflationary concernsand softening of the US dollar.
Silver was also limit down in Asia with the upside being limited to$12.87 as all the physical buying was easily absorbed by overseas sellinginterest. Position liquidating eventually forced the metal down to $12.77by the close. In Europe prices continued their steady descent to fix at$12.6050 in London and finally hit $12.40 per once during NY trading hours.Following the release of worse that anticipated US ISM index data the whitemetal followed gold in its recovering, but was faced with large amounts ofoffers sitting above $12.80 and gave away some of the acquired gains. Priceaction was very quiet by the end of the day with the settlement at $12.655.We believe that for the moment the $12.50 level acts as a first support and$13 as a major resistance.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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