Wednesday, 28-March-2007
Gold rallied up to a one month high of $668.80 paid on EBS afterTuesday’s NY close of six dollars below that level. The safe haven buyingwas triggered by crude surging to a seven-month peak of $68.09 per barrelon rumors that a US naval vessel had clashed with Iran.
The yellow metal isusually viewed as a hedge against oil led inflation and any disruption ofoil transport through the Strait of Hormuz would have serious impacts oncrude as 25 percent of Arabian oil production is shipped through thiswaterway. The rumor of a military action against Iran was quickly dismissedby the US Navy, White House and British officials and prices retreated toopen the Tocom session around $666 levels. Japanese traders were happy totake profit and this resulted in only a two dollar retreat, as the marketremained supported by the increasing tensions over the 15 seized UKcitizens. Blair said that “further action may have to be taken” adding thatit was time to “ratchet up diplomatic pressure”. The Prime Minister wasalso quoted as saying that Britain was in contact with allies in NATO andthe UN Security Council to build support for its position. On the otherhand Iranian embassy in London said that the 15 British sailors and marinesseized by Iran last week were 0.5km inside Iranian waters at the time, butalso assured that the governments of the two countries have the ability tosolve the incident through contacts and close cooperation.
Britain howevercontinues to describe the detention as unacceptable and illegal and decidedto impose a freeze on all official bilateral businesses with Iran until thecrisis is over. All the price action seemed to by over by the opening ofour time zone trading. The yellow metal remained bounded by a narrow range,supported by buying interest below $665 and profit taking pressures above$666. After the opening of the Comex division of the New York MercantileExchange the worse than expected US February durable goods orders putpressure on the US dollar and helped gold to jump up to $669.80. New ordersrose by a smaller than anticipated 2.5 percent last month, while ordersexcluding transportation were down for the fourth time in the last fivemonths. Subsequently the Iran’s foreign minister Monouchehr Mottaki wasquoted by Turkey’s private CNN Turk television network as saying thatTehran would release a British woman sailor detained with the other 14“today or tomorrow”. The news made the precious metal come off the highswith the prices fixing at $666.75 on the second London fix, which is still2.75 dollar above the previous PM.
Dow industrials came down 117.04 basicpoints after Bernanke said that US economic uncertainty has risen with theUS dollar falling more than 1 percent against the yen. The Federal ReserveChairman said that the near term prospects for the US housing market areuncertain with the developments in the subprime mortgage sector raisingmore questions. He added that the economic growth has slowed to a moresustainable pace and that the core inflation is gradually ebbing. US dollarsoftness after the testimony release did not help the yellow metal, as USdistillate and gasoline inventory draws came out to be not as bad asexpected last week. Prices retreated and remained firmly above the $666level for some time. Due to the complete lack of interest in the market,prices slipped and extended the low to $663.70 about an hour before theclose. We believe that gold needs to break above $668 in order for thetechnical buying to be triggered and opportunity opened for further gains.
Silver also rallied during the electronic trading to open on Tocomten cents firmer. The metal failed to challenge the $13.40 resistance andwas pushed below $13.30 per once by overseas selling interest. During theEuropean hours prices gradually climbed higher to eventually reach a peakof $13.46 during the Comex session. The white metal however could not holdon to the gains as gold lost ground and revisited the overnight lows. Webelieve that a period of consolidation is needed and that in the short termthe $13.20-13.50 range will prevail.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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