The precious metal firmed during the European hours as oil edged towards $60 a barrel, recovering from a two-day slip. The peak was further extended after the first set of the US economic data. The US overall producer price index fell1.6 percent last month, representing the sharpest decline since October 2001. According to the Labor department the core prices that exclude volatile food and energy costs also experienced a large fall and the deepest one since August 1993. On the other hand the country’s retail sales decreased by less than anticipated in October due to a rise in auto sales.The release of the figures forced the US dollar to loose ground with the European currency making its way up to 1.2871. Gold traded to the high of $629.3, but in the absence of any follow-through buying and accompanied by a smaller than projected rise in US business inventories in the month of September, prices pulled back to fix at $627 on the second London fix. Spot extended the losses further as profit taking emerged to tumble down to $619. For the rest of the NY trading session the metal monotonously hovered within a narrow range above the 620 dollar mark.

We believe that gold needs to stabilize and build a firm base before any sustainable gains could be acquired. Meanwhile according to the IAEA confidential report that was obtained by Reuters, Iran is still pushing ahead with uranium enrichment despite the risk of UN sanctions. The report confirmed that Iran started a second experimental chain of 164 interlinked centrifuge machines last month enriching only nominal amounts of uranium to the 5 percent level required for power plant fuel. This amount is far below the 80 percent required for atom bombs.

Silver saw some buying interest during the early Asian session, bringing us just a couple of cents short of the $12.90 intermediate resistance. The acquired gains could not however resist to the selling pressure prompted by the platinum plunge and the white metal ended the Far East trading on the lows. The downside was further extended to $12.80 in early London before fixing five cents above it. Subsequently the prices rallied following the softer than expected US inflationary data, which propelled us up to $13 on the weakening dollar. The rally was short lived as profit taking along with copper remaining below the crucial 7000 level dragged spot down to $12.74. The metal only partially managed to recover the intraday losses to close above $12.80. We believe that silver will remain volatile in a wide $12.50-13.10 range in the short term.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

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