(OroyFinanzas.com) – Gold rallied up to a one month high of $668.80 paid on EBS after Tuesday’s NY close of six dollars below that level. The safe haven buying was triggered by crude surging to a seven-month peak of $68.09 per barrel on rumors that a US naval vessel had clashed with Iran.

The yellow metal is usually viewed as a hedge against oil led inflation and any disruption of oil transport through the Strait of Hormuz would have serious impacts on crude as 25 percent of Arabian oil production is shipped through this waterway. The rumor of a military action against Iran was quickly dismissed by the US Navy, White House and British officials and prices retreated to open the Tocom session around $666 levels. Japanese traders were happy to take profit and this resulted in only a two dollar retreat, as the market remained supported by the increasing tensions over the 15 seized UK citizens. Blair said that “further action may have to be taken” adding thatit was time to “ratchet up diplomatic pressure”. The Prime Minister was also quoted as saying that Britain was in contact with allies in NATO and the UN Security Council to build support for its position. On the other hand Iranian embassy in London said that the 15 British sailors and marines seized by Iran last week were 0.5 km inside Iranian waters at the time, but also assured that the governments of the two countries have the ability to solve the incident through contacts and close cooperation.

Britain however continues to describe the detention as unacceptable and illegal and decided to impose a freeze on all official bilateral businesses with Iran until the crisis is over. All the price action seemed to by over by the opening ofour time zone trading. The yellow metal remained bounded by a narrow range, supported by buying interest below $665 and profit taking pressures above$666. After the opening of the Comex division of the New York Mercantile Exchange the worse than expected US February durable goods orders put pressure on the US dollar and helped gold to jump up to $669.80. New orders rose by a smaller than anticipated 2.5 percent last month, while orders excluding transportation were down for the fourth time in the last five months. Subsequently the Iran’s foreign minister Monouchehr Mottaki was quoted by Turkey’s private CNN Turk television network as saying that Tehran would release a British woman sailor detained with the other 14“today or tomorrow”. The news made the precious metal come off the highs with the prices fixing at $666.75 on the second London fix, which is still 2.75 dollar above the previous PM.

Dow industrials came down 117.04 basic points after Bernanke said that US economic uncertainty has risen with the US dollar falling more than 1 percent against the yen. The Federal Reserve Chairman said that the near term prospects for the US housing market are uncertain with the developments in the subprime mortgage sector raising more questions. He added that the economic growth has slowed to a more sustainable pace and that the core inflation is gradually ebbing. US dollar softness after the testimony release did not help the yellow metal, as US distillate and gasoline inventory draws came out to be not as bad as expected last week. Prices retreated and remained firmly above the $666 level for some time. Due to the complete lack of interest in the market, prices slipped and extended the low to $663.70 about an hour before the close. We believe that gold needs to break above $668 in order for the technical buying to be triggered and opportunity opened for further gains.

Silver also rallied during the electronic trading to open on Tocom ten cents firmer. The metal failed to challenge the $13.40 resistance and was pushed below $13.30 per once by overseas selling interest. During the European hours prices gradually climbed higher to eventually reach a peak of $13.46 during the Comex session. The white metal however could not hold on to the gains as gold lost ground and revisited the overnight lows. We believe that a period of consolidation is needed and that in the short term the $13.20-13.50 range will prevail.

MKS Gold & Silver, Daily Report
By Lidia Nazarova

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