The peak was short lived and the prices gradually slipped back down to $698 by the Comex opening and then continued its way to see the low of $694.20 on some profit taking. The buying interest picked up and the metal recovered fixing just below the 700 level on the second London fix. The yellow metal hovered within the$699-701 range for the most of the day popping higher and revisiting the$704 level prior to the close. The FOMC raised the interest rates by 25 basic points to 5% as expected accompanied by the “some further policy firming may yet be needed” statement, but the timing and extent of such firming will depend on the evaluation of the economic outlook. This prompted gold and silver trading lower on access after the news.

The ongoing geopolitical tensions and the US dollar weakness continue to provide a firm footing for gold. The investor’s interest to allocate part of portfolio to commodities also offers a support. Investors diversify into precious metals as a hedge against uncertainty in the macro-economic environment and the under performance of more traditional investment tools like equities and bonds.

According to Citigroup Inc. the monthly average value of long-term and short-term speculative positions held in U.S.commodity futures increased sharply last moth to near all-time record high of $128 billion. A considerable number of declines in the production forecasts for this year also keep the gold markets alert.

Last week for example an accident at the main shaft of the South Deep mine resulted in a cut of the gold production by half in 2006 as the main will be out of order for the next 6 to 12 months. We believe that the choppy volatile markets will prevail and that the metal needs to consolidate further before supplementary price gains can be sustained.

Silver had a rather quiet trading day in the Far East as soon as markets were mainly focused on gold’s and PGM’s performance. In Europe the metal bounced up just shy of the previously seen high of $14.68, but retreated more then 50 cents following the gold’s downside move after Comex opening, before regaining some ground again. We believe that silver remains on the upside trend supported by the surging base metals prices with copper hitting a new all-time high of $8,100 a ton today having rallied around 85 percent since the beginning of the year. Platinum and palladium also continue their way on the upside with platinum trading to a record $1,267.5/oz on healthy investment inflows.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

© OroyFinanzas.com