Lots of GATA's friends quoted in MarketWatch gold wrapup

Gold Futures Close at 5-Week High

By Myra P. Saefong and Polya Lesova
MarketWatch.com
Wednesday, April 4, 2007

http://www.marketwatch.com/news/story/gold-futures-touch-5-week-high/sto...

SAN FRANCISCO -- Gold futures climbed Wednesday to close at a five-week high, underpinned by weakness in the dollar and physical demand, even as Iranian President Mahmoud Ahmadinejad triggered a decline in crude-oil prices by saying captured British sailors would be freed.

"Gold bullion received quite a surprise vote of confidence during Wednesday's trading session," said Jon Nadler, an analyst at Kitco.com, in e-mailed commentary. "Just when the bulls expected to see a large decline in prices due to the resolution of the Iran-U.K. crisis, they instead got their long-standing wish of seeing gold surpass $672 per ounce come true."

Gold for June delivery rose $7.70 to close at $677.40 an ounce on the New York Mercantile Exchange. It climbed to $681 earlier, its strongest intraday level since March 1.

"The current rise in the gold price is overdue, but overhead resistance got in the way," said Julian Phillips, an analyst at GoldForecaster.com. "It is now out of the way so the jump is happening now."

"This is caused not solely by the situation in Iran but a combination of factors," he said in e-mailed comments.
The factors include the fall in the dollar and expectations for more declines, oil prices holding above $60 a barrel, strong physical demand for gold at just under $660 and overall "global uncertainty," especially in the Middle East, he said.

Indeed, "there has been an aggressive shorting campaign to keep gold below $666," said Peter Grandich, editor of the Grandich Letter, in e-mailed comments. But "like all previous capping exercises, this one is failing also thanks to an incredibly strong physical market."

The dollar fell against the euro and yen Wednesday after reports showed non-manufacturing sectors of the U.S. economy expanded at a slower pace in March while factory orders rose less than forecast in February.

The weakness in the greenback helped fuel investment demand for gold.

Meanwhile, crude-oil futures closed lower Wednesday after Ahmadinejad pardoned 15 U.K. Navy personnel being held captive by Tehran and said they would be released, ending a diplomatic crisis that had raised concerns about oil supplies in the region.

But oil's losses were limited by gains in gasoline futures, which climbed on the heels of an eighth-weekly drop in U.S. motor gasoline supplies.

Iran's Ahmadinejad used a news conference for the Persian New Year to announce that the British sailors would be released. The announcement was not a major surprise; the U.K. government had said earlier it believed Iran would like an "early resolution" to the crisis.

The 15 sailors were seized by armed Iranian forces 13 days ago and charged with trespassing in Iranian waters. The U.K. had insisted they were in Iraqi waters, patrolling under a United Nations mandate when they were taken prisoner.

Neal Ryan, director of economic research at Blanchard, said, "It's the physical supply side of the market in London that's been influencing prices so much the last few weeks. ... Gold sales have been swamping the market the last three weeks ... and the price has held up considerably well and even increased under that pressure," he said in e-mailed comments. "I think what we've seen today is the end of that selling pressure."

So "we're going to see prices jump up and challenge the May '06 high in 2-3 weeks in my opinion," he said.

Against this backdrop, other metals prices climbed along with gold, though palladium was a lone loser, with its June contract closing down $1.60 at $354.15 an ounce.

May silver rose 19 cents to end at $13.62 an ounce and July platinum rose $6.60 to close at $1,258.90 an ounce.

May copper tacked on 7.3 cents to close at $3.3875 a pound, ending at a level not seen since late October. On Tuesday, copper futures climbed more than 4% to close at their highest level in five months, piggybacking on growing global demand and concerns over falling supplies.

"Overall, we will be on the lookout for [base metal] profit-taking and producer selling in the near term, but as things stand, it looks as though dips will be well supported," said William Adams, analyst at BaseMetals.com.

Meanwhile, world investment in the gold market declined by 13% to 743 metric tons in 2006, according to GFMS' gold survey report released Wednesday.
World investment comprises of implied net investment, bar hoarding and coin fabrication demand, the report said. But in "approximate value terms, the figure was up by 18% year-on-year to $14.4 billion.

"Dollar weakness, geopolitical tensions and other commodity prices remained important drivers of investment demand over much of last year," it said. And "after years of lackluster performance, 2006 saw investment in physical metal experience somewhat of a comeback."

World jewelry fabrication fell by 428 metric tons in 2006 vs. a year ago to a 15-year low of 2,280 metric tons, GFMS said.

The report is "a decent summary of conditions that could lead to higher prices, but the overall picture still points to lessened investment demand in 2006 and declining jewelry offtake (very price sensitive)," said Kitco.com's Nadler.

In related news Wednesday, central banks have sold massive amounts of their gold reserves over the last three weeks, according to Donald Doyle, Jr., chief executive of Blanchard.
But considering that investment demand consumed that supply increase and prices held steady, it's actually a bullish sign for the precious-metals markets, he said in a press release Wednesday.

About 45.5 metric tons of central bank gold flooded the market over the last three weeks, vs. about 7 metric tons total during the three weeks before that, he said.

"To see prices hold steady and today make significant gains despite the massive selling pressure is a sign that parabolic upward price moves could be right around the corner as these banks have probably reached a point at which they don't have many more reserves they are prepared to sell," he said.

Inventories and indexes
On the supply side, gold warehouse stocks fell 98,676 troy ounces to stand at 7.47 million troy ounces as of late Tuesday, according to Nymex data. Silver supplies rose 624,779 troy ounces to stand at 126.5 million troy ounces, while copper supplies were unchanged at 36,386 short tons.

In equities, indexes tracking the performance of stocks in the metals and mining sector rose Wednesday.
The Amex Gold Bugs Index rose 1.9% to close at 356.02 points, the CBOE Gold Index added 1.8% to end at 149.85 points and the Philadelphia Gold and Silver Index rose 1.3% to close at 142.98 points.

As for sector exchange-traded funds, the StreetTracks Gold Trust ETF rose 1.5% to close at $66.79, the iShares Silver Trust ETF gained 1.9% to end at $135.93, and the Market Vectors-Gold Miners ETF rose 1.8% to finish at $41.19.

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