We fixed at $636.75 on the first London fixing and had difficulty rebounding above 637 dollar mark. The weakness was supported by the recuperation of some of the resent losses by the US dollar and softer tone in crude ahead of the release of the weekly Department of Energy inventory data. The bounce back in the dollar prompted position liquidating, forcing the precious metal to drop down to $633.75 after the opening of Comex, it lowest since one week. Stronger dollar makes gold costlier for holders of other currencies and so lowers bullion demand. The yellow metal managed to recover some of the losses before a choppy PM London fix. Buyers and sellers kept changing sides until they finally agreed on the fixing price of $636. The release of the US crude inventory data gave a push to the market, which managed to revisit the highs, but that was short lived.

According to the government report US crude oil supplies fell in the week ended on the 1st of December, while refinery use jumped to 90.5 percent of capacity. The refined fuels stock piles also unexpectedly fell across the board amid strong demand. Oil price action remains choppy as from one side there is a possible further supply cut from OPEC and from the other side forecasts for a mild winter next week. Spot was retreating and recovering without any clear direction for the rest of the NY session to finally settle near an extended low.

We believe that gold will remain volatile ahead of the year’s end with a possibility of a correction before challenging the $650 resistance. The precious metal already managed to go as far as $649.50 per ounce on Friday, which represented a 16-week high, but failed to break higher. The breach of this resistance is crucial for the $570 next target to be achieved. On the downside the main support is provided by the 200-day moving average of $614. As for the direction the US dollar and crude oil market seem to remain the main drivers.

Silver also opened lower in Asia and after a small bounce gradually lost ground to hit the low of $13.67. In London the prices retreated further to reach $13.60 per troy ounce and subsequently fix eight cents above the low. Spot then climbed higher following gold’s and oil’s firming to mark the high of $13.83. The white metal remained mostly above the $13.70 level for the rest of Comex hours, but weakened into the close. We believe that silver will remain enclosed by the $13.50-14.20 range for the short term.

MKS Gold & Silver, Daily Report
by Lidia Nazarova

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