Friday, 30-March-2007
Gold was extremely quiet in Asia, with some two-way interest on thislast day of the 2006-2007 fiscal year. Traders were closing their books andthe metal remained bounded by a two dollar range.
During the European hoursonce again there was nothing to report apart from the fact that the yellowmetal remained firm supported by high crude prices and ramping up tensionsover the week-long British soldier’s detention crisis. The British ForeignSecretary Margaret Beckett said today that the Iranian diplomatic note gaveno sign that Tehran is seeking a resolution to the situation. The lettersaid Iran respected the rules and principles of international lawconcerning territorial integrity of states and that Britain must accept itsresponsibility for the consequences of any border violation. Beckett alsoadded that the continued televised confessions of the hostages were“appalling and completely contrary to normal international convention”.Iran broadcasted a second video of the hostages today, who admittedentering Iranian waters illegally. British Minister Tony Blair expresseddisgust at the video and said that Iran risked further isolation unless itreleased them. A sailor named Nathan Thomas Summers said “We trespassedwithout permission”, “I would like to apologize for entering your waterswithout any permission… I deeply apologize”. Tehran still did not give anyinformation about where the soldiers were held and who is holding them. TheUN Security Council adopted a statement on Thursday calling a swift end tothe crises, but did not pass a strongly worded draft statement. EU foreignministers voiced solidarity at a summit in Germany today, but werereluctant as a bloc to freeze businesses with Iran over the row. Blairurged for patience and said that London would consult its key allies overthe weekend.
The crises which came at the same time as the heightened Middle Easttensions over Iran’s nuclear ambition helped to push oil to a seven-monthhigh as concerns arose about disruption of the exports from the region. Thestrategic channel at the entrance of Gulf is the world’s most importantwaterway, which according to the US Energy Information Administration (EIA)accounts for the flow of about two-fifth of all globally traded oil. TheStrait is a narrow bend of water separating Oman and Iran connects biggestGulf oil producers like Saudi Arabia with the Gulf of Oman and the ArabianSea. Brent crude futures (LCOc1) rose more than a dollar on the day, to$69.14 per barrel, its highest since September 4, 2006. The ascent was alsobacked by the French oil strike. Union leaders at France’s Fos-Lavera oilhub met Gaz de France and port officials in order to try and end a 17-daylong strike. Workers have already rejected two previous draft agreementsand a third one is supposed to be submitted today. The strike blocks 63ships including 39 oil tankers, a situation which might force half of theFrench refineries to be closed by next Wednesday. Some refineries arelikely to start shutting down already today if the dispute is not solved.Fos-Lavera is the world’s third-largest port for oil products with 64.2million tones moving through it every year. Traders fear that the supply tothe world’s biggest petrol consumer, United States, will be affected as thesummer period of high consumption is approaching. Gold tried to challengethe upside, but was limited to $664, as participants remained sidelinedahead of the US economic releases due later during the day. After the opening of the Comex division of the New York MercantileExchange market got very choppy and volatile. The first set of the US datawas out shortly after the opening of the NY session. US incomes andspending rose much more than expected in the month of February, while coreconsumer prices also outpaced forecasts.
The core prices were up 2.4percent compared with a year ago with the officials at the Federal Reservepreferring the 12-month rise in core prices to remain between 1 and 2percent. As inflationary concerns remained US dollar gained some ground,but the price action of the yellow metal became very messy. Spot keptretreating and recovering, with the upper and lower side of the intradayrange extended slightly, to $665.20 and $662 respectively. After a coupleof sharp and volatile ups and downs the precious metal was sold on thesecond London fixing, it fixed at $661.75 and subsequently further extendedthe low to $660.80. The PM fixing was at the same time as the release ofthe second set of US data, which came out to be mixed. Constructionspending beat the estimates by far, rising 0.3 percent in February verses a0.6 drop anticipated by analysts polled by Reuters. The government reportstated that figures represented the biggest increase since March 2006 andthat it was due to a jump in the nonresidential construction thatoutweighed a drop in residential and federal ones. The US consumerconfidence however slipped to its lowest since September 2006 this month.The decrease was due to the worries about rising prices and slowing incomegains, pointing to an uncertain outlook for the economy. The direction ofgold was reversed shortly after and the prices recovered all the intradaylosses. The rally back up did not stop there as a rumor about US citizenstold to leave Bahrain triggered safe heaven buying. What also added fuel tothe fire is the market talk of Iran planning to stop selling oil in USdollars. Spot was propelled to $667.80 less then two hours before theclose, but as later on the White House denied the Bahrain rumor pricesretreated and settled around $664 levels.
We believe that concerns about the Middle East crises and crude oilsupplies will continue supporting the market, with gold’s first supportlying at $660 and resistance at $668. Next week the following US economicdate will be awaited: ISM manufacturing index on Monday, pending home saleson Tuesday, ADP payrolls along with ISM non-manufacturing due on Wednesday,initial jobless claims on Thursday, to finally end the week with therelease of the non-farm payrolls, unemployment rate and wholesalesinventories.
Silver followed approximately the same scenario as gold. Prices werestagnant overnight and during London hours range trading prevailed. Themetal seemed to be well supported below $13.30 as copper jumped more thantwo percent breaching a key resistance level at $6,900. After the openingof the Comex division of the New York Mercantile Exchange trading got verychoppy. Spot kept dropping and recovering with the bargain hunters waitingbelow $13.30 and selling orders accumulated around $13.40. The white metalfinally settled on the top side of the intraday, twenty-cent range. Webelieve that silver has the possibility to go higher, but a period ofconsolidation does to seem to be over yet.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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