(OroyFinanzas.com) – Tocom opened with some selling interest from the general public, which forced gold two dollars lower, down to $610.80. Buying that emerged on the dip along with firming oil however allowed prices to recover all the losses and to settle near the highs.

During the European hours spot gradually gained ground and fixed at $614.10 on the first London fixing, up 60 cents from the previous AM one. Prior to the opening of the Comex division of the New York Mercantile Exchange there were some signs of weakness in the market, which sharply retreated in the first minutes of NY trade. The prices hit the low of $612.10 after a set of mixed US economic data was out. The US import prices gained a stronger than expected 1.1 percent last month, representing the biggest monthly increase since May2006. Economists view import prices as a source of inflationary pressure in US production of goods and services and so watch the figures closely.

For the year 2006 the prices however rose only 2.5 percent, which is a sharp fall compared to an 8.0 percent increase the year before. US sales accelerated in the month of December, climbing by a larger than anticipated 0.9 percent, the gain was the largest since July. The November’s sales were however revised down. On the other hand during the year 2006 there was the smallest year-over-year gain in sales since 2003. This mixed data did not exercise pressure on the metal for long, as US dollar softened after a three-day rally and short covering emerged on the lows. Subsequently spot bounced up sharply helped by the follow through buying and recovering oil. Prices rallied to $619.80 per ounce and fixed just 5 cent off the peak on the second London fixing. The yellow metal then hovered on the upper side of the intraday range until about an hour before the close, when the $621 resistance was breached. Stops were hit above and the high extended to $627.80.

We believe that gold needs to consolidate above the 200-day moving average of $621 in order to be able to head higher. Next week the following US economic data will be awaited by the market participants: NY Fed survey on Tuesday; PPI on Wednesday; CPI, housing starts, initial jobless claims along with leading indicators and Philadelphia Fed survey due Thursday; to finally end the week with the release of the consumer sentiment.

Silver tracked gold on Tocom. It was sold down to $12.36 before some physical related buying emerged to propel the prices to $12.45. In Europe spot hovered in a ten cents range before plunging versed the Asian lows after the opening of the Cemex session. The white metal then followed gold in its spectacular recovery and rallied to $12.70 resistance, which it was unable to breach. Spot remained on the top side of the intraday range until an extension of the peak to $12.86 not long before the close. We believe that silver has an upside potential, but it needs to stabilize and build a base before the acquisition of further gains could be sustainable.

MKS Gold & Silver, Daily Report
By Lidia Nazarova

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