The data from the Commodity Futures Trading Commission out late Monday showed that the large non-commercials were net long 84,293 contracts in gold as off last Tuesday, down from 88,834 contracts the week before. Subsequently, after the opening of the Comex division of the NewYork Mercantile Exchange, the yellow metal rebounded helped by worse than expected US new durable goods orders for the month of November. The orders plunged much more than anticipated on a big drop in civilian aircrafts. Durable goods, which are the goods expected to last for at least three years, experienced their biggest drop since July 2000. The government report stated that manufacturing, fabricated metal, computers and electronic orders also fell, indicating economic weakness. The data release weighed on the dollar with the Fed funds futures raising chances of the Federal Reserve cutting interest rates in the first three months of 2007. Spot climbed back above $640 after the figures. The European Central Bank said today that gold and gold receivables held by central banks in the Eurosystem fell by 106 million euros in the week ended on the 24th of November.

The decline in reserves was due to the sales of three Eurosystemcentral banks, which were consistent with the Central Bank Gold Agreement of 2004. The ascent did not last as the second set of US economic data prompted selling. The US consumer confidence fell to 102.9 in November verses 106.0 projected, indicating the lowest reading since August. The pace of existing home sales had however increased a little in October. The analysts estimated the sales to slow to 6.15 million unit pace, but they climbed to 6.24 million last month. Profit taking and selling pressure pushed the prices to try as low as $636.80 on the second London fix after having started at $641. After half an hour of trying we finally fixed at $637, while spot was trading more than a dollar higher. Not even a second passed after the fix as the precious metal suddenly started collapsing to end up at $633.30 per ounce in a matter of minutes, hitting stops along the way. The market failed to recover all the intraday losses and closed 637.75.

Apparently there is a fairly firm resistance around the $642-643 levels, which gold keeps failing to break. We believe that unless the resistance is breached we will remain bounded by the $620-645 range in the short term. Meanwhile Iran, the world’s fourth largest oil exporter,continues to insist on wanting the nuclear energy in the only and singl eaim of producing electricity. Tehran is not required to allow theInternational Atomic Energy Agency (IAEA) into sites where there is no clear sign of nuclear activities, but the country stated today that it will let the UN nuclear watchdog take further environmental sampling of materials because it wants to show that its nuclear plans are peaceful. IAEA said that it had questions to ask before it could declare the intent of the program as such. Nevertheless the three European powers, Britain, France and Germany, have circulated a fresh draft UN Security Council resolution today on sanctions against Iran over its refusal to stop uranium enrichment. According to a Western diplomatic source the new draft removed all reference to Iran’s Bushehr nuclear reactor and weakened the sanctions, as Russia had demanded.

Silver was very quiet in the Far East, trading above $13.50 level for the entire session and coming off slightly into the close. During our time zone the metal at first retreated to fix at $13.44 in London, but then climbed to $13.56 after the opening of NY. Spot could not sustain the gains and followed gold in its descent, to tumble down to the fixing levels again. According to the data out late last night funds increased their net long positions to 37,466 lots from 35,094 the prior week. The white metal gradually regained ground and extended the high to 13.67 by the end of the Comex hours. We believe that the major target still remains the $14 keyresistance.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

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