The selling was triggered by the continuing weakness in crude, which tumbled nearly three dollars before settling on the extended lows. Stops were hit below the 624 dollar mark and the yellow metal was unable to recover back above that level in Asia. The price action calmed down by the second part of the Far East session with the precious metal trading sideways around $623-624 levels. The same quiet scenario persisted during the early European hours, followed by a bounce and a fix at $626. Spot however never managed to trade as high as the first London fixing price and retreated preceding the opening of the Comex division of the New York Mercantile Exchange. The US non-farm payrolls that came out straight after were much better than expected.
The American economy added 167,000 jobs in December verses 100 thousand anticipated with the previous two months upwardly revised. This report presented a substantially healthier picture of the job market with some parts of it however troubling the Federal Reserve policy makers who are worried about potential inflation. The area of concern was a largest monthly increase since April in average hourly earnings, which climbed 0.5 percent last month. Following the data release US dollar strengthened, sending gold and euro lower. It was a one way street, with the prices falling sharply on emerged fund selling and hitting stops below the 200-day moving average of$620 followed by a break below the 100-day moving average of $612. Spot eventually reached a ten-week low of $606.50 before fixing three dollars above it on the second London fixing. Buying interest on the fix did not provide enough support to the metal and the second wave of selling that followed further extended the low to $602.50. The precious metal then hovered on the bottom side of the intraday range until the close.

We believe that the market continues to be short of liquidity and that further sharp price moves might take place. The direction is likely to be taken from the crude and US dollar fluctuations, but if the major $600 psychological support fails to hold we could retreat down to $570. While on the upside a resistance is now provided by the $612 level followed by $620. Next week market participants will be awaiting for the release of the US trade balance and wholesales inventories on Wednesday, initial jobless claims along with the budget balance on Thursday, to then end the week with the announcement of the US retail sales, business inventories and import prices.

Silver lost nearly twenty cents after NY close last night. Even though many participants were buyers on Tocom, constant selling around$12.70 did not allow the metal to extend gains. During the European hours the prices made another fruitless attempt to break higher to then fix just on the resistance level. After the opening of Comex trading spot plunged along with gold’s massive sell off, to gradually extend the low to $12.03, which was reached about an hour before the close. We believe that after today’s settlement on a soft note a further downside correction cannot be ruled out. As for the time being, the $12 level acts as a major psychological support and the 100-day moving average of $12.34 became a resistance.

MKS Gold & Silver, Daily Report
By Lidia Nazarova

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