In Europe the yellow metal tried the upside again, but once more was limited to $640.30 levels. Subsequently spot started its ongoing descent. The precious metal fixed at $638.25 before continuing its way down to $635.40. The drop was followed by a rebound, which was however short lived as bettert han expected third quarter US GDP out after Comex opening acted in favor of the dollar and sent gold back to the lows. The Gross Domestic Product measures total economic activity within US boarders and it expended at a 2.2% annual rate verses an estimation of 1.8% from the Wall Street, despite a biggest drop since the first quarter of 1991 in the investment in housing. According to the government report the faster than anticipated growth of the economy was due to the strong business investment. Nonresidential investment rose at a 10% annual rate while corporate profits jumped by 4.6%, way above 0.4% projected. US personal spending excluding food and energy, which is the favored inflation measure of Federal Reserve, was only slightly lower during the third quarter while the core prices came out to be as predicted. The yellow metal hovered between $637 and $638 levels until it fixed just in the middle on the second London fix, while the US new home sales came out to be worse than expected. Despite a jump of more than a dollar in crude prices, the market did not react. Oil climbed after the release of the US inventory data, which showed that distillate and gasoline supplies fell last week verses a forecasted increase. The increase in the refinery utilization did not help as crude supplies fell more than anticipated. Spot prices remained stagnant on the lower side of the intraday range until the end of the Comex session with nothing really to report.

We believe that gold will remain range bounded unless the resistance around $642/643 levels is breached. The direction is likely to continue to be taken from the US dollar and oil price fluctuations. Saudi Oil MinisterAli al-Naimi said today that “it is important for us to obtain the best possible returns from oil through faire and stable prices”. OPEC had signaled that a “faire and stable” price would be around $60 per barrel for US crude. The opinions about further supply cut differ though. Kuwait’s Oil Minister told Reuters that the current US crude prices are “very comfortable” and that further cuts would only be needed if prices were to fall sharply, while Saudi Oil Minister said that the prices are not a decisive factor and that OPEC would need to cut again if recent hold backs failed to balance the market.

Silver opened ten cents higher on Tocom compared to the NY closing price last night. The metal was very quiet and range bounded. In Europe spot tried to challenge the upside helped by a weaker US dollar, but was limited to $13.77 level, which it failed to sustain. The prices gradually lost ground to hit $13.56 per ounce during Comex hours. The white metal recovered from the lows and traded sideways above $13.60 for the rest of the day, but weakened into the close. We believe that silver will remain enclosed by the $13.20-13.70 range for the short term.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

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