(OroyFinanzas.com) – Tocom was opened today, but it did not help the liquidity much. Gold was very quiet due to the absence of a lot of market makers. The yellow metal had a narrow two dollar range and very dull lacking interest sideways trading.
In Europe the precious metal remained as stagnant as overnight. Brent steadied around $68 per barrel supported by the US gasoline market and stocks at a seasonal six-year low ahead of the peak summer season. Preliminary Reuters poll of analysts showed that US gasoline inventories are expected to have fallen last week for the 12th consecutive week. Some however believe that prices might be pushed lower if the US Energy Information Administration (EIA) data due tomorrow will show a smaller than anticipated fall in gasoline stocks. Gold challenged the upside, but as well as overnight the prices failed to get above $679. Prior to the opening of the Comex division of the New York Mercantile Exchange the metal started to loose ground, followed by a sharp drop of four dollars in the first couple of minutes of NY trading. The inability of the precious metal to keep rising triggered selling and long liquidation with the prices reaching the low of $673.20 prior to the second London fixing.
The US ISM manufacturing index that came out at the same time was better than estimated, helping the US dollar to gain some ground and keeping the downside pressure on the yellow metal. The US factory activity expanded more than projected in April with the Institute of Supply Management index rising to 54.7 verses 51.0 forecasted. The figure indicated expansion in the national factory activity sector and was the highest since May 2006. Inflationary pressures also rose as the prices paid index climbed to 73.0 from 65.50 in March. On the other hand pending US home sales index experienced a sharper than expected drop in March, falling 4.9 percent to104.3, its lowest since March 2003. There was some selling interest on the second London fixing, which made the prices fix near the lows, at $673.60down 3.4 dollars from the previous PM. After a moment of hesitation the downside was further extended to $672.20. The yellow metal then rebounded slightly, but failed to get back above the 675 dollar mark, spending the last two hours of Comex trade hovering mainly below it.
As for the supportive geopolitical issues the market seemed to have ignored them. Iran’s Foreign Minister Manouchehr Mottaki along with officials from the Group of Eight leading industrialized nations and European Union will be attending the May 3-4 conference in Egypt to discuss ways to end the violence in Iraq. Just two days before the meeting Iran’s government spokesman was quoted as saying that they will not negotiate with the UnitedStates until it stops its “evil approach”. Washington accuses the Islamic state of destabilizing Iraq and this is on top of the conflict over the Tehran’s nuclear program. The spokesman said today that “the Americans know that they are faced with Iran as a real, capable power because Iran has entered the field of the nuclear technology and has the will to move forward”. Washington did not have formal diplomatic relations with Iran since the Iranian Islamic revolution in 1980 and the holding of the US hostages. The US State Department however said that the Secretary of State Condoleezza Rice is open to direct talk with Iran over Iraq despite United States making it clear that it will not engage in broader talks with Iran unless Tehran halts its most sensitive nuclear work. In addition to that Iran rejected Western criticism at a meeting on the fraying nuclear Non-Proliferation Treaty today, saying that its atomic program was being misrepresented as a quest for bombs and this could bring “grave consequences”. The NPT requires members without nuclear bombs not to acquire them and commits the original five nuclear powers to phase their arsenals. We still believe that in the absence of a strong buying interest gold might experience further downside correction. If the $670 support fails to hold the metal might revisit $750 levels. As for the upside the first resistance continues to be provided by the $681-682 per ounce.
Silver was also quiet on Tocom, failing to make it above $13.45. During out time zone this level was once again fruitlessly challenged. Steady copper prices which remain sensitive to news about a Peruvian mine strike did not seem to help silver much. The largest mining union in world number three copper producer Peru launched a national wide strike onMonday, demanding improvements in benefits. The strike was largelyexpected, but it is the duration and the overall production impact that is likely to generate speculation in the coming days. The white metal fixed at$13.45, down 5 cents from the previous London fixing to subsequently follow gold in its downside. The retreat was sharp, with prices losing over two percent in two hours. The metal hit the low of $13.14 per ounce and then very slowly managed to recover some of the intraday losses to settle just below $13.30 per ounce. We believe that silver might be vulnerable to further correction unless it managed to get back above and stabilize beyond$13.40.
MKS Gold & Silver, Daily Report
By Lidia Nazarova
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