During the early European hours the precious metal lost further ground to dip below $625. The prices then managed to recover supported by higher then expected US initial jobless claims in the week ended on the 30th of December that were out straight after the Comex opening. The four-week moving average of claims, which provides a better picture of the labor market, also rose to 317,500 verses 316,250 the week before. The European Central Bank said in its report today that the Euro system gold holdings increased by 36 million euros in the week ending December 29 due to one central bank selling 19 million, while another one refined some of its gold coins into fine gold bullion. Sharp price moves were once again the main characteristic of the trading conditions. The metal bounced up from the lows to fix at $628.70 on the second London fixing, while the second set of US data was announced. The Institute for Supply Management’s services index was in line with the estimations, at 57.10. The services sector makes up about 80 percent of the US economic activity and the number above 50 indicates growth. New factory orders in America were however up slightly less than forecasted.

Manufacturing monitors the health of the economy and so is being closely watched by the Federal Reserve in order to be able to judge whether a cooling housing market has a broader than anticipated impact on growth. The persisting weakness in base metals and energy made it hard for the yellow metal to break above the 630 dollar mark, which it kept failing to achieve. Copper extended yesterday’s nearly 8 percent drop and crude retreated by more than a dollar as temperatures in the key US oil consuming region were forecasted to be above normal for at least the next six days. The National Weather Service said this week that the US heating demand is expected to be 30 percent below normal this week. The US Energy Information Administration(EIA) inventory report that followed added some more pressure on crude oil.US gasoline and distillate stocks rose more than anticipated last week due to the strong imports. Refinery runs were also up, but are expected to drop in the next few weeks on maintenance. There was a lack of a definite direction in this choppy and still short of liquidity market. Spot fluctuated in a three dollar range not being very sure where to head next to finally settle on a weak note. We believe that in the short term gold will continue to be volatile and range bounded.

Silver also could not revisit Wednesday’s highs and remained below$12.70 level in the Far East, which seemed to provide a resistance. During our time zone the white metal mirrored gold’s moves. It first plunged down to $12.40 to then fix 22 cents above the low. The recovery was however more pronounced and sustained in silver as it rebounded to gradually extend the high to $12.84 and hovered on the upper side of the intraday range until the close. We believe that the grey metal has an upside potential, but the weakness in base metals is exercising a downside pressure at the moment. As a result we think that silver is likely to be range bounded in the short term with the 100-day moving average of $12.34 acting as a main support and$13 as a resistance.

MKS Gold & Silver, Daily Report
By Lidia Nazarova

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