Slight falls in the dollar against the euro and yen from the recent highs prompted buying of the yellow metal as it became cheaper in key overseas trading areas as Europe and Asia. There was however no follow through buying along with profit-taking orders blocking the upside, which was limited to $628.20 in the Far East. During the European hours the prices at first remained in a very tight range, but managed to fix just on the 30-day moving average of $629, where it faced some technical resistance. This obstacle was nevertheless breached after the opening of the Comex division of the New York Mercantile Exchange. Spot jumped to $633.40 per ounce despite the less-than-expected increase in the US initial jobless claims. According to the Labor Department the claims rose to 317 thousand in the week ended December the 23rd verses 320,000 estimated. The four week moving average of claims, which is considered to be a more precise measure, also declined. The ECB said in its regular weekly consolidated financial statement that gold and gold receivables held by euro zone central banks fell by 41 million euros in the week ending December the 22nd. Subsequently the gains were sharply extended further with such a move not being a surprise in these illiquid market conditions. The precious metal reached the three-week high of $636 before retreating to fix 4 dollars below the peak. The second set of US economic data came out to be better than anticipated. The US consumer confidence jumped in December to an eight-month high of 109.0, while pace of existing home sales rose to 6.28 million units annual rate in November verses 6.19 million projected. The yellow metal then had a little push from the fifth week in the row of falling US crude inventories. According to the government report the crude stockpiles fell sharply last week due to weather delays and increased refinery utilization. The prices did not manage to revisit the highs though, but hovered on the top side of the intraday range until the close. We believe that the market will remain choppy due to the lack of liquidity in this year-end holiday time.

Silver remained firm overnight, even if the prices slipped below $12.80 level prior to Tocom opening to remain bounded by an 8 cents range throughout the Asian session. There was nothing either to report during the early European hours as the market remained generally stagnant. The prices fixed at $12.84 in London, down from $12.86 of yesterday. Spot started gaining ground after the opening of Comex, mirroring gold in its ascent. The peak of the day was extended to 12.89, but the market lacked momentum to break above the $12.90 resistance. The white metal remained firm throughout the rest of the NY session. We believe that silver has an upside potential, but the market will tend to be volatile as it remains very thin.

MKS Gold & Silver, Daily Report
by Bernard Sin

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