Wednesday, 18-April-2007
Gold was bid throughout the Tocom session on continued shortcovering. Prices eventually hit the high of $690 and settled there. Duringour time zone the resistance of $690 to $691 was challenged several times,but every time the yellow metal failed to breach it due to profit taking atthese levels.
The precious metal fixed at $690.40 on the first Londonfixing, up 2.4 dollars from the previous one, but then gave all the gainsaway to extend the low to $686.20 after the opening of the Comex divisionof the New York Mercantile Exchange. For the whole NY trading sessionprices were recovering on weaker US dollar and retreating on sellingpressure near the highs. The dollar touched a 26-year low against sterlingtoday and traded near a record low verses the euro. Despite that the softerUS dollar makes gold cheaper for investors holding other currencies, it didnot seem to help the yellow metal much as it could not break out of thefour dollar range. The dollar weakness can be partially explained by thediminished expectations for US rate cuts which contrasted with prospectsfor monetary tightening in Europe and Asia. The only excitement of the daywas the release of the Energy Information Administration report for theweek ended on the 13th of February. The data showed that crude along withdistillate and gasoline inventories were down by more than expected.Gasoline inventories fell for the 10th week, putting the US stockpiles morethan 13 percent below early February levels and standing at their lowestlevels since the week of October 28, 2005. On the other hand the USrefinery utilization rose to 90.4 percent, which would mean more gasolinesupply in the future. Brent lost over a dollar after the data announcement,forcing the precious metal back to the lows. Overall it was another veryquiet day with the prices capped within the $686-690 range. We believe thatgold needs to break out of the current range in order to be able toestablish a clearer direction. We however continue to think that the metalhas the possibility to head towards the $700 major psychological resistanceafter a firm base is build.
Silver followed exactly the same scenario as gold. After openingaround $13.90 levels on Tocom prices gradually headed north and settled onthe highs of the Far East session, just above the 14 dollar mark. In Europefurther upside was challenged, but as well as for the past four days a firmresistance from $14.05 to $14.10 levels capped the market. Prices thenheaded south and after the opening of the NY trading session hit the low of$13.90. For the rest of the Comex hours the white metal fluctuated within aten cent range below $14 without enough interest out there to help itstabilize above this important psychological level. Meanwhile coppercontinues to hover around 10-month high on fund technical buying anduncertainty about the situation in a large Indonesian mine. There is apotential for labor unrest at Freeport-McMoRan Copper & Gold Inc.’sGrasberg mine in Indonesia, where a labor group for native Papuan employeeswas said to be preparing a protest over advancement opportunities. Webelieve that firm base metals should continue to provide a support, but inorder for silver to get on a clear upper trend the metal has to consolidateabove the $14 level.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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