In Europe the prices at first remained bounded by a narrow range before fixing at $625.65 on the AM fix followed by a rally to $626.75. The gains could not be sustained though and spot drifted somewhat lower again. After the opening of the Comex division of the New York Mercantile Exchange the losses were extended, as the US dollar firmed on the United State’s mixed October employment report. The unemployment rate fell to 4.4 percent verses no change expected, representing the lowest rate since May 2001. The US non-farm payrolls increased by less than anticipated in October, but that was balanced by an upward revision to September and August figures. The August payrolls were revised to 230,000 jobs verses 188,000 previously reported and September was revised up to 148,000 from 51,000.

The US dollar firmed following the data release, which suggested that labor conditions remain favorable for US workers and that the labor markets are growing tight, which could contribute to inflation pressures. That lifted speculation that US interest rates would have to stay high to curb these pressures. The ground gaining by the US dollar provoked a wave of selling which brought us to the low of $617.70 shortly after. The precious metal recovered some of the losses as short covering emerged. The prices fixed at $622.75 on the second London fix, up two dollars from the previous PM one. The US service sector, which makes up about 80 percent of the country’s economic activity, rose by more then projected last month according to the Institute of Supply Management’s services index. This data failed to move the market, which went dull for some time, with spot trading sideways in the $624-626 range. The US crude oil futures climbed above $59 a barrel after reports of a threat to a BP Indiana refinery and the US consulate in Nigeria warning of possible plans by militants to attack oil infrastructure in Africa’s top exporter. Meanwhile BP said that its refinery operations were not affected. Subsequently the yellow metal extended the high to trade up to $629.20 per ounce shortly before the close.

We think that the today’s corrective dip was beneficial to gold and that the first target still remains the $630 level. Even though the link between the oil and the yellow metal appears to have weakened as investors focus more on the health of the US economy, we believe that crude along with the US dollar will remain one of the leading factors in the gold market direction. Next week most of the US economic data releases will be on Thursday. On that day will we have the US initial jobless claims, the trade balance, import prices, wholesale inventories and finally the consumer sentiment. Meanwhile the imposition of sanctions on Iran that sparkle concerns about the oil supply could still take weeks as Russia and China , the two veto-wielding powers, oppose punitive action against Tehran. The draft orders all countries to prevent the sale and supply of equipment, technology and financing contributing to Iran’s nuclear and ballistic missile programs. It could also freeze assets of people and entities involved in these programs and prevent them from traveling except for special events. Security Council diplomats said that Russia is expected to demand the softening of the sanctions and redefining an exemption for nuclear reactor Moscow is building in Iran. Russian Foreign Minister Sergei Lavrov said today that “we do not intend to drop back our efforts as regards the problem of Iran and nuclear power, but what the EU troika drew up went way beyond what was agreed”. Lavrov added that the resolution should only focus on the areas the International Atomic Energy Agency has defined as serious. Those areas include; uranium enrichment, chemical processing and heavy-water reactors.

Silver also opened lower on access and CBOT trading and remained in a narrow range below the $12.60 level. In Europe the metal was at first propelled to $12.65 per ounce, but failed to hold on to the gains and fixed three cents below the peak in London. After the opening of the NY trading session the prices plunged along with gold’s descent, to tumble down to$12.33, briefly breaching the five-day moving average of $12.36.
Subsequently the white metal regained the territory above the $12.50 leveland remained firmly above it for the rest of the Comex hours. We believe that today’s downward correction was a healthy one and that silver is able to acquire further gains if the $12.50 support is sustained.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

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