(OroyFinanzas.com) – Gold was extremely quiet in Asia, with some two-way interest on this last day of the 2006-2007 fiscal year. Traders were closing their books and the metal remained bounded by a two dollar range.
During the European hours once again there was nothing to report apart from the fact that the yellow metal remained firm supported by high crude prices and ramping up tensions over the week-long British soldier’s detention crisis. The British Foreign Secretary Margaret Beckett said today that the Iranian diplomatic note gave no sign that Tehran is seeking a resolution to the situation. The letter said Iran respected the rules and principles of international law concerning territorial integrity of states and that Britain must accept its responsibility for the consequences of any border violation. Beckett also added that the continued televised confessions of the hostages were“appalling and completely contrary to normal international convention”. Iran broadcasted a second video of the hostages today, who admitted entering Iranian waters illegally. British Minister Tony Blair expressed disgust at the video and said that Iran risked further isolation unless it released them. A sailor named Nathan Thomas Summers said “We trespassed without permission”, “I would like to apologize for entering your waters without any permission… I deeply apologize”. Tehran still did not give any information about where the soldiers were held and who is holding them. The UN Security Council adopted a statement on Thursday calling a swift end to the crises, but did not pass a strongly worded draft statement. EU foreign ministers voiced solidarity at a summit in Germany today, but were reluctant as a bloc to freeze businesses with Iran over the row. Blair urged for patience and said that London would consult its key allies over the weekend.
The crises which came at the same time as the heightened Middle East tensions over Iran’s nuclear ambition helped to push oil to a seven-month high as concerns arose about disruption of the exports from the region. The strategic channel at the entrance of Gulf is the world’s most important waterway, which according to the US Energy Information Administration (EIA) accounts for the flow of about two-fifth of all globally traded oil. The Strait is a narrow bend of water separating Oman and Iran connects biggest Gulf oil producers like Saudi Arabia with the Gulf of Oman and the Arabian Sea. Brent crude futures (LCOc1) rose more than a dollar on the day, to$69.14 per barrel, its highest since September 4, 2006. The ascent was also backed by the French oil strike. Union leaders at France’s Fos-Lavera oilhub met Gaz de France and port officials in order to try and end a 17-day long strike. Workers have already rejected two previous draft agreements and a third one is supposed to be submitted today.
The strike blocks 63 ships including 39 oil tankers, a situation which might force half of the French refineries to be closed by next Wednesday. Some refineries are likely to start shutting down already today if the dispute is not solved. Fos-Lavera is the world’s third-largest port for oil products with 64.2million tones moving through it every year. Traders fear that the supply tothe world’s biggest petrol consumer, United States, will be affected as the summer period of high consumption is approaching. Gold tried to challenge the upside, but was limited to $664, as participants remained sidelined ahead of the US economic releases due later during the day. After the opening of the Comex division of the New York Mercantile Exchange market got very choppy and volatile. The first set of the US data was out shortly after the opening of the NY session. US incomes and spending rose much more than expected in the month of February, while core consumer prices also outpaced forecasts.
The core prices were up 2.4 percent compared with a year ago with the officials at the Federal Reserve preferring the 12-month rise in core prices to remain between 1 and 2 percent. As inflationary concerns remained US dollar gained some ground, but the price action of the yellow metal became very messy. Spot kept retreating and recovering, with the upper and lower side of the intraday range extended slightly, to $665.20 and $662 respectively. After a couple of sharp and volatile ups and downs the precious metal was sold on the second London fixing, it fixed at $661.75 and subsequently further extended the low to $660.80. The PM fixing was at the same time as the release ofthe second set of US data, which came out to be mixed. Construction spending beat the estimates by far, rising 0.3 percent in February verses a 0.6 drop anticipated by analysts polled by Reuters. The government reportstated that figures represented the biggest increase since March 2006 and that it was due to a jump in the non residential construction that outweighed a drop in residential and federal ones. The US consumer confidence however slipped to its lowest since September 2006 this month. The decrease was due to the worries about rising prices and slowing incomegains, pointing to an uncertain outlook for the economy. The direction of gold was reversed shortly after and the prices recovered all the intraday losses. The rally back up did not stop there as a rumor about US citizens told to leave Bahrain triggered safe heaven buying. What also added fuel to the fire is the market talk of Iran planning to stop selling oil in US dollars. Spot was propelled to $667.80 less then two hours before theclose, but as later on the White House denied the Bahrain rumor prices retreated and settled around $664 levels.
We believe that concerns about the Middle East crises and crude oil supplies will continue supporting the market, with gold’s first support lying at $660 and resistance at $668. Next week the following US economic date will be awaited: ISM manufacturing index on Monday, pending home sales on Tuesday, ADP payrolls along with ISM non-manufacturing due on Wednesday, initial jobless claims on Thursday, to finally end the week with the release of the non-farm payrolls, unemployment rate and wholesales inventories.
Silver followed approximately the same scenario as gold. Prices were stagnant overnight and during London hours range trading prevailed. The metal seemed to be well supported below $13.30 as copper jumped more than two percent breaching a key resistance level at $6,900. After the opening of the Comex division of the New York Mercantile Exchange trading got very choppy. Spot kept dropping and recovering with the bargain hunters waiting below $13.30 and selling orders accumulated around $13.40. The white metal finally settled on the top side of the intraday, twenty-cent range. We believe that silver has the possibility to go higher, but a period of consolidation does to seem to be over yet.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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