Thursday, 29-March-2007
Gold was very dull and stagnant in Asia today. Prices failed tostabilize above the $666 level, but got supported below $665. During theEuropean trading hours the same quiet and range bounded scenario prevailed.
The yellow metal was inactive but firm, supported by the Britain keeping uppressure on Iran to release 15 military personnel seized last week, whilethe world’s fourth biggest oil exporter, Iran, continues to insist thatBritain must accept its crew was arrested in Iranian waters. Britain saidthat it is waiting for details on an undertaking by Tehran to allowdiplomats to meet sailors who did not yet have any contact with Britishofficials. Many in UK were angered by the release of the video of the onlywoman crew member captured wearing a black headscarf and smoking acigarette. Britain said that parading the female sailor was completelyunacceptable and humiliating for the troops, while US called the Iran’sbehavior as “reprehensible” and “odious”. Britain is now seeking approvalfrom the UN Security Council for a statement that would “deplore” thedetention of the military personnel and call for their immediate release.The tensions were further escalated by an incident at the Iranian consulatein Iraq, which the British military denied and called a “geographicalcoincidence”. Iranian consul in the Iraqi city of Basra said today: ”Theycame at 10 am and surrounded the consulate. After 20 minutes they startedshooting in different direction. They are trying to irritate us because ofthe issue of the capture of the British soldiers, but this behavior willmake the issue worse”. The consul described the act as a provocative one ata time of heightened tensions between the two countries. The detention ofthe militants coupled with United States conducting its largest exercise inGulf waters since 2003. Russia warned US today that it must take care notto aggravate tensions over Iran with its naval presence in the Gulf as anyescalation could hit crucial oil supplies from the area.
By the mid-day thesituation was aggravated by the statement from the secretary of Iran’sSupreme National Security Council broadcasted on the state television aboutthe fact that the country will delay the release of the woman among the 15British military personnel if Tehran was faced with a “fuss and wrongbehavior” from Britain. Gold however did not manage to break higher, asselling orders above $666 kept capping the market and this is despite oiltrading above $66 per barrel. After the opening of the Comex division ofthe New York Mercantile Exchange the US economic data came out to be betterthan expected. Initial jobless claims surprisingly fell to a seasonallyadjusted 308,000 verses 318 thousand anticipated. The reading was at itslowest since more than two months. The four-week moving average of claimsalso fell, for the third straight week.
The US gross domestic product(GDP), which measures total goods and services output within the country’sboarders, was stronger in the forth quarter than earlier estimated.According to the Commerce Department that was due to the higher levels ofbusiness inventories. Larger inventories can reflect a backlog of unsoldgoods or businesses building stocks up in anticipation of better salesahead. The personal consumption expenditures excluding the volatile foodand energy items, a prices gauge favored by the Federal Reserve, advancedat a slightly lower 1.8 percent in the fourth quarter. The Fed Chairmansaid that the potential inflation remains the US central bank’s primarypolicy concern. After the data release the yellow metal plunged over onepercent lower, briefly dipping below $660, on slightly firmer US dollar andfund selling. Prices then hovered just above the 660 dollar mark for sometime, supported from falling further by crude gaining over a dollar on theday. After a period of hesitation the precious metal continued its descent,hitting stops below $660 and extending the low to $655.60 on follow throughselling and end-of-quarter liquidation. Prices however managed to recoverthe majority of the intraday losses as short covering emerged on the backof London Brent (LCOc1) hitting the high of 68.22 per barrel and settledabove $660 per ounce. We believe that gold should obtain some supportaround the $655 level with the major resistance still lying in the regionof $668.
Silver followed exactly the same scenario as gold. The metal wasextremely quiet and range bounded in Asia and London, with nothing outthere to report. After the opening of the NY trading spot started to looseground, with the descent continuing all the way down to $13.10. Eventuallyprices managed to recover practically all the intraday losses and settledabove $13.30 per ounce. We believe that in the short term the $13 levelshould provide a firm psychological support, where as the major resistanceremains at $13.50.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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