Wednesday, 25-April-2007
Gold had a narrow three dollar range overnight, with physical buyingon the dips below $683 and selling pressure above $685. In Europe theyellow metal gradually climbed to fix at $686.20 on the first Londonfixing, which marked the high of the day.
Market remained very quiet andsubdued with the precious metal remaining faithful to the last eight days$680-694 range. After the opening of the Comex division of the New YorkMercantile Exchange surprisingly strong March US durable goods orders sentthe yellow metal to revisit $683 per ounce area. New orders for costly andlong-lasting US made manufacturing goods climbed by 3.4 percent verses 2.5percent expected. According to the Commerce Department report thenon-defense capital goods excluding aircraft that serves as a proxy forbusiness investment also climbed 4.7 percent, representing the biggestincrease since September 2004. The data shows that businesses arecontinuing to invest to expand operations. The Federal Reserve policymakers are closely monitoring business investment behavior, as they areconcerned that if companies cut back spending it could deepen a slowdown innational economic activity that began late last year.
Short covering on thedip helped gold to recover fairly quickly though with the prices hoveringon both sided of the $685 until the second London fixing. Selling interesthowever emerged on the fix. We started trying at $685 to gradually ease andfinally fix a dollar below the starting point. The PM fixing wasaccompanied by the release of the worse that anticipated US new home sales.Sales rose to an annual rate of 858,000 units in March verses 890 thousandestimated. The EIA report released shortly after showed that US stocks ofgasoline fell sharply last week and refinery utilization dropped as theworld’s largest consumer heads into summer gasoline season. Inventories ofgasoline have fallen for the 11th consecutive time, down almost 15 percentsince the start of February. Brent gained some ground after the release ofthe report, but this did not help the precious metal much as it remainedhovering on the bottom side of the intraday range and firmed only slightlyinto the close.
Talks between Iranian negotiator Ali Larijani and EU foreign policyChief Javier Solana started today in Turkey’s capital Ankara. Arriving forthe talks Larijani said that “irrational” Western preconditions hadthwarted diplomacy in the quest for a peaceful solution. Iran expects newideas from EU to try and end a standoff over Tehran’s refusal to suspenduranium enrichment. The hopes for a breakthrough were however dampened inthe run-up by a new Iranian vow not to stop enrichment despite sanctionspressure from the UN Security Council. We believe that geopoliticaltensions, weak US dollar and firm crude will continue providing a support,but the market seems to be caught within the $680-695 range for the timebeing. We think that is it crucial for gold to be able to sustain the $680support level in order to avoid a correction down to $670.
Silver also had a tight range in Asia today. The market was capped byselling pressure around $13.80 and supported by short covering ten centslower. During our time zone the white metal followed gold in its move onthe upside with the peak of $13.88 being hit after the opening of the NYtrading session. The prices however could not hold on to the gains andrevisited the overnight lows to subsequently remain fluctuating on bothsides of the $13.80 level until the close. We believe that silver is likelyto remain bounded by the $13.70-14.05 range in the short term until aclearer direction is established.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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