(OroyFinanzas.com) – Gold was very quiet on Tocom. Prices once again remained in a narrow range mainly below the $665 level. During the European hours the yellow metal started to gradually gain some ground to fix at $665.90 on the first London fixing with further upside still being capped around the 667-668 levels.

Trading was boring and range bounded until the opening of the Comex division of the New York Mercantile Exchange. Subsequently the price action got very choppy as Mahmoud Ahmadinejad held a press conference. The Iranian president said that “the Iranian government is sorry the British government is not brave enough to confess its mistake over entering Iranian waters”, adding that he was “saddened” by the Britain’s action. Gold rallied very sharply as the news conference went on, breaching technical levels and hitting stops above $670. Spot jumped up to $675.80 but that was short lived as after the offering of medals to the militants who seized the 15 British sailors the Iranian president announced their release. Oil dropped over a dollar as immediate worries over crude shipments from the world’s fourth-biggest exported eased. Ahmadinejad said that the 15 sailors were “free after this meeting and can go back home to their families” and that they would be released as a “gift” to Britain. Iran’s president wished them“good luck” and joked with them at the ceremony to mark their release. Such a quick liberation was certainly not expected and the yellow metal tumbled back down to $667-668 levels.

Ahmadinejad also stated that Iran could consider its relations with the United States if President George W. Bush and his administration changed behavior. Washington replied today that if Iran wanted to change its relationship it would have to suspend uranium enrichment. “The behavior that needs to change is the Iranians, not theUnited States” said State Department spokesman Tom Casey. The dip back down was brief though as fund and option related buying pulled the prices back towards the peak of the day. Subsequently came a worse than anticipated set of US economic data. New factory orders rose a weaker than projected 1.0 percent in February, as according to the Commerce Department orders for machinery and metals declined. The Institute for Supply Management said its non-manufacturing index fell to 52.4 in the month of March, its lowest since 2003.

The service sector in United States represents about 80 percent of the country’s economic activity and its easing growth inched the Fed rate cut chances up. Implied prospects for the Federal Reserve to cut interest rates by the end of June rose to 24 percent with the futures showing a 57 percent chance of an August rate cut. Slowing US economy weighed on the dollar and helped the precious metal to hold firmly above$670 per ounce with the recovering crude oil also providing support. Crude regained the previous sharp losses as the EIA report stated that US gasoline inventories dropped in the week to the 30th of March. Spot then quietly hovered on the top side of the intraday range until the close. We believe that a weak outlook for the US dollar, slowdown in the US economy and geopolitical tensions will continue to provide support for gold. The acceptance of higher prices by the physical buyers as well as decline in the supply is also likely to boost investor confidence in the metal and so act as a supportive factor to the market.

Silver followed the same scenario as gold. Prices hovered below the$13.40 resistance overnight and fruitlessly tried to challenge the upside during our time zone with nothing much to report. After the opening of theNY trading session spot rallied hitting a one month high of $13.65, mirroring gold and supported by firming base metals, but failed to hold onto all the gains as profit taking came into the market. The white metal nevertheless remained hovering firmly above the 13.50 dollar mark until the close. We believe that if the $13.50 is sustained, further gains are possible.

MKS Gold & Silver, Daily Report
By Lidia Nazarova

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