The US Fed has stated it will keep rates fixed until mid 2013. They also stated that they will implement a “rage of tools” if economic slowing persists. Lower interest rates may be sparking merger activity by providing attractive use of cash companies are holding. Metals could be switching from a flight-to-quality instrument to a more classic inflation vibe.
Tag Archives: Metals
Gold Special Report: Poised for a Temporary Correction
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October gold prices from the 2011 lows to the recent 2011 highs are up roughly $300 an ounce! From the July lows, October gold has already managed a rally of roughly $150 an ounce. Therefore one might suggest that half of the rally from the 2011 lows was the result of a collection of uncertainties earlier this year, while the other half of the 2011 gold rally was the result of more recent events. Clearly the Euro zone debt threat was responsible for a 
hefty portion of the early July rally in gold prices, but over the last two weeks, the US debt situation seems to have taken over as the primary driving force in the marketplace. Furthermore, over the last two weeks the Commitments of Traders report has highlighted a 73,700 contract build in the non commercial and non-reportable net long position in gold and that suggests the bullish gold trade is becoming increasingly more crowded. While it might be just as premature to suggest that the debt crisis in the Euro zone has been fully corralled, seeing both the US and European debt crisis placated at the same time that the world is being presented with tightening threats from both India and the Chinese could create some significant headwinds for gold and silver.
Other temporary limits on gold prices might be seen from the realization that commodity prices in general have remained caught in a weak down trend pattern since the April highs and with the brunt of the North American growing season soon to pass beyond the most critical weather stage, and the energy complex partially off balance because of the threat of strategic petroleum reserve releases, the whole inflation argument has at least temporarily lost its bite. About the only consistently bullish trend for gold from the outside market environment is the ever present pattern of weakness in the US Dollar. However, even the Dollar might be expected to bounce in the wake of a debt deal as the US media will probably be slow in covering the low points of the latest US legislative disaster.
In the end, the bull camp can certainly argue that the gold bull market will probably continue beyond the ultimate resolution of the US debt ceiling battle but our concern is that gold might be presented with a rather aggressive correction in the event that US uncertainty is temporarily deflated. In fact, with $1,600 gold pricing, there has not been a clear indication of a pattern of gains in physical gold production. So far, there also haven’t been many signs of gold producers moving to hedge their forward production. It also seems as if Central Bankers from China, Russia and India remain more inclined to expand their holdings rather than liquidate those holdings so it is possible that net central bank action in gold will remain supportive.
In conclusion, the basis of this special report is to predict a temporary correction in October gold of $70 to $110 an ounce into and immediately after the US announces a debt deal. To make things perfectly clear, the goal of this special report is not to predict a sustained washout or a top in gold prices. However, given the rancor of this latest political battle and the fact that many politicians continued to put party before country, one has to think that time will quickly expose almost any deal from Washington as a smoke and mirror spending reduction package. In the end, the market can certainly expect the US deficit to continue to build by perhaps as much as another $2 trillion in the best case scenario and perhaps by as much as $4 trillion under a less favorable environment. It is also possible that many credit rating agencies are simply poised to cut the US debt rating “when” and “if” the debt ceiling is raised and the latest US spending cuts are judged to be phony. Other bulls will suggest that another expansion of the US deficit ceiling will in turn increase the need to inflate out of the current mess, and that the US Fed might become even more accommodative after they are shown some false fiscal promises on the spending front. However, the bull camp in gold probably can’t expect the Fed to instantly change its stance in the wake of movement on Capitol Hill and it is possible that gold prices could be confronted with noted slowing fears for a period of time before the Fed is pressured to save the day again.
Since we think that ultimately the bull market in gold will survive and will likely forged another round of new all time highs later this year, longer term traders that are risk averse or capital restricted might simply wait for a massive correction and then look to purchase some December gold call options.
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Metals: Some Flight-To-Quality Gold Buying; but Vulnerable to Slowing News
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe were mixed during the overnight session, early indications are that US equity markets would open with moderate losses later on this morning. The US Dollar is near unchanged levels against most of the major currencies this morning, although posting a gain versus the Pound. Greek unions will stage large-scale protests in Athens today, demonstrating against proposed new austerity measures for their nation. Japanese Retail Sales during May were down 1.3%, a smaller decline than market forecasts. A private survey of German Consumer Sentiment during June was 5.7, roughly in line with expectations. UK GDP during the first quarter was up 1.6%, weaker than forecasts. Major US economic numbers to be released this morning include a private survey of US Housing Prices at 8:00 AM, a private survey of US Consumer Confidence at 9:00 AM, and private surveys of store sales released during the session. The second leg of this week’s Treasury refunding, the 5-year Note Auction, will have results announced at 12:00 PM.
GOLD MARKET FUNDAMENTALS: The gold market might be getting some minor flight to quality lift this morning, as protests and a work stoppage in Greece have rekindled uncertainty again. Apparently the vote on the latest austerity package is extremely close and with a 48 hour strike now underway, the political and economic pressure is set to rise dramatically on the Greek Parliament members. Many members of the Greek Parliament think they have to vote for the austerity package and that they will be voted out of office for their efforts. With some physical commodity markets rebounding today, that could provide some minor spillover support to gold but that support might be mitigated in the event that the Case-Shiller home price report rekindles concerns of slowing again. There is also a US Consumer Confidence reading due out this morning which is generally expected to soften and that in turn might contribute to fresh US slowing concerns. Some gold traders think the lackluster 2 Year note auction yesterday could provide gold with a lift, especially if there is a measure of doubt levied toward Treasuries as a safe haven instrument as a result of the last two auctions this week. In the end, it does seem as if the gold bulls want Greece to pass the austerity package and that angle isn’t that surprising considering the gold markets negative reaction to any news of slowing over the last two weeks. Some players suggest that gold remains a physical commodity that can be expected to slide in the wake of slowing news and therefore flight to quality interests aren’t as pronounced as many bulls would have hoped. Comex Gold Stocks were 11.392 million ounces down 323 ounces.
SILVER MARKET FUNDAMENTALS: September silver has managed a bounce in the early Tuesday US trade and that is partly a function of a technically overdone status and that might also be partly the result of hopes that Greece will ultimately pass the current austerity package offering. While exchange stocks of silver increased overnight, those stock levels have remained below the psychological level of 100 million ounces. Actually Comex Silver Stocks were pegged at 98.928 million ounces for a rise of 1,067,960 ounces. Silver stocks have declined in 12 of the last 20 days, but so far the trade hasn’t seen much of a reaction to the stocks readings. Like gold, silver bulls seem to want to see Greece accept the latest austerity package and since that vote doesn’t technically take place until Thursday, the silver market is likely to see back and forth trade action in the near term. In the face of violent protests in Greece that could undermine silver instead of support it, as silver recently has acted like a classic physical commodity market facing ongoing evidence of slowing. At least in the early Tuesday US trade, the action in the currency markets wasn’t giving off a definitive track and it is possible that currency traders are also set to balk at fresh positions into the Greek vote window and also into the quarter end.
PLATINUM: Apparently platinum prices to the prior session’s lows were seen to be too cheap. However, platinum has managed a noted recovery attempt overnight and that action might be the result of reports of a shut down of operations at a South African platinum mine. It is somewhat surprising to see platinum manage to rise off a minor supply side threat, especially in the face of an environment fraught with broad based slowing fears. Therefore, the bounce in platinum prices might be the result of supply side issues or it might be the result of simple end of quarter technical balancing. Initial resistance is seen at $1,700, with some potential pivot point action seen around the $1,694 level.
Metals: Slowing Fears and Other Outside Market Forces Influence
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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe are generally weaker during the overnight session, early indications are that US equity markets would open with moderate losses later on this morning. The US Dollar is higher against most of the major currencies this morning, although posting a loss versus the Yen. The Prime Minister of Greece will reshuffle his cabinet and pursue a vote of confidence in order to pass new austerity measures as part of a potential new aid package for his nation. The ruling party in Japan may raise corporate and income taxes to repay government bonds used for funding post-earthquake reconstruction. Euro zone CPI during May was up 2.7%, in line with market forecasts. UK Retail Sales during May were down 1.4%, weaker than expectations. Major US economic numbers to be released this morning include Weekly Jobless Claims and May Housing Starts at 7:30 AM, and the Philadelphia Fed’s survey of US Business Conditions during June at 9:00 AM. In addition, Fed Regional President Fisher will give a speech during the session.
GOLD MARKET FUNDAMENTALS: While gold prices seemed to forge some upside action yesterday off the uncertainty in the US economy yesterday, others were simply impressed with gold’s ability to hold together in the face of weakness in a broad cross section of physical commodity markets. Perhaps the gold market was partially undermined by news of rising Chinese gold production from the first four months of 2011, but that negative impact could be partially countervailed by news overnight that Russian gold and currency reserves reached up to the highest level in almost 3 years. News that the Russian central bank has generally been building its gold and currency reserve base in each of the prior two years might also cushion the gold market against what appears to be a pattern of weakness in a host of physical commodity markets. At least at times yesterday, the gold market seemed to benefit from evidence of slowing in the US economy, but initial expectations for the scheduled data today wouldn’t seem to give a definitive signal on the direction of the US economy. More than likely, gold remains in a position to garner some lingering support from the Greek debt crisis, especially since the Euro has started the Thursday US trade off on a slightly weaker footing. However, a stronger Dollar probably countervails some of the flight to quality lift for gold off the ongoing Euro zone debt saga. Comex Gold Stocks were 11.267 million ounces down 26,783 ounces.
SILVER MARKET FUNDAMENTALS: The silver market seems to be somewhat off balance as a result of broad based slowing fears and perhaps because of weakness in a host of physical commodity markets. While Comex silver stocks remained below the potentially psychological level of 100 million ounces overnight, the stocks yesterday saw a daily increase of 600,511 ounces to stand at 99.4 million ounces. Comex Silver Stocks have declined in 12 of the last 20 days. Talk of strong Asian demand for silver might also be providing the market with some support against what at times seems to be a broad based physical commodity market liquidation bias. Silver continues to see generally up beat analysts forward price projections, although some forecasts have recently been pulled down from levels forecasted earlier this year. In the mean time, silver might have to rely on flight to quality or safe haven support, as classic physical commodity market fundamentals could be undermining in the short term. So far, the silver market hasn’t taken much in the way of direction from earnings and production news from a series of silver miner results this week.
PLATINUM: The platinum market saw noted downside action on the charts overnight and given the apparent softening of the US economic outlook, the initial weakness today isn’t that surprising. With the market also seeing evidence of Indian tightening overnight and renewed Greek problems in the headlines it would seem like the platinum market almost totally discounting evidence of strong Chinese platinum import data. Typically seeing a physical commodity market discount favorable Chinese import/demand news story is usually a sign of broad based macro economic negativity in the marketplace. With the expectation of lower equities and some strength in the Dollar, the platinum market also looks to face a wave of negative outside market factors. Near term downside targeting is seen at $1,750 basis the July platinum contract.
Metals: Under the Influence of Economic Uncertainty
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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe were generally weaker during the overnight session, early indications are that US equity markets would open with moderate gains this morning. The US Dollar is weaker against most of the major currencies this morning, although posting gains versus the Yen and Swiss. News reports indicate that a potential Greece aid package may ask private creditors to swap their current holdings for longer maturities. The IMF has urged China to let the value of the Yuan rise further in order to help rebalance the Chinese economy. Japanese GDP during the first quarter was down 3.5% year-on-year, weaker than market expectations. The UK Trade deficit during April was 7.39 billion Pounds, a smaller deficit than projected. The Bank of England will announce their monetary policy decision at 6:00 AM, while the European Central Bank will announce their monetary policy decision at 6:45 AM. Major US economic numbers to be released this morning include Weekly Jobless Claims and the April International Trade Balance at 7:30 AM, and April Wholesale Trade at 9:00 AM. In addition, Fed Vice Chairman Yellen and Fed Regional Presidents Plosser and Pianalto will give speeches during the session. The final leg of the Treasury’s monthly refunding, the 30-year note auction, will have results announced at 12:00 PM.
GOLD MARKET FUNDAMENTALS: The gold market starts the Thursday US trading session off on a slightly weaker footing despite somewhat supportive currency market action. Apparently residual concern of slowing in the US economy has lost its capacity to foster safe haven buying of gold, or perhaps the magnitude of the slowing fears in the US aren’t higher enough to prompt fresh buying action. Some players think the impending ECB rate decision has spooked some longs to the sidelines, while others think that the ECB won’t be able to justify a hike in this meeting, especially given the damage to sentiment caused by the most recent round of Greek debt troubles. Some traders think that gold is deriving some support from the tensions in the most recent OPEC meeting, where the cartel was clearly divided between raising production and holding production steady. Those OPEC members against raising production levels suggested that they were concerned about overheating in the Chinese economy, especially if energy prices were reduced in the wake of a higher output move. In fact, the main dispute inside OPEC was on the outlook for the global economy and that could indirectly provide some support to gold prices ahead. In looking ahead, the gold market will see a couple US Fed speeches today, with the Fed’s Plosser already weighing in with a partially dovish statement overnight. With the Fed Beige book, US data and recent Fed statements mostly leaning toward more slowing in the US, it is possible that some gold bulls are becoming hopeful of a delay in the end of QE2 or some other gold supportive stance from the US Fed. Comex Gold Stocks were unchanged at 11.214 million ounces.
SILVER MARKET FUNDAMENTALS: Somewhat surprisingly the silver market is showing some minor early gains today and that could be a sign that silver is starting to sense a softening of the US Fed tone. Clearly silver would be undermined in the event the ECB raises interest rates this morning but that isn’t a widely anticipated development. Seeing silver rally and gold decline today could also suggest that macro economic uncertainty isn’t high enough to support gold and that type of action could also suggest that silver is indeed hopeful of a delay in the end of US QE2. Some traders are suggesting that silver is coiling for some type of key decision ahead and therefore the last month’s high and low prices could be seen as critical technical points directly ahead. Comex Silver Stocks were 101.015 million ounces down 7,683 ounces. Silver stocks have declined 12 of the last 20 days.
PLATINUM: The platinum market was showing some minor weakness in the early Thursday US trade, despite an initial attempt to rally in the silver market. However, weakness in copper and energy prices and a lack of direction in world equity markets seems to have left the bear camp with a slight edge. Platinum and other physical commodity markets are probably fretting the ECB rate decision this morning, even though US central bank comments recently have leaned more toward an extension of easing. While platinum recently saw favorable comments toward Ford motor company shares, the tone of the Fed Beige book yesterday would seem to be somewhat restraining of platinum and other physical commodity prices. Platinum has also shown some coiling action for the month of June and that could mean that the trade is waiting for a clearer track on the US economy before committing to a fresh trend. Up trend channel support in the July platinum market is seen at $1,818.80 today and that level rises to $1,825.20 on Friday.
Metals: June Gold Highest Since May 4th; Silver Higher
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Global equity markets were generally higher during the overnight and early morning hours, with indications that US equity markets would open with sizable gains this morning. The US Dollar is generally weaker against most of the major currencies, although posting a strong gain versus the Yen. News reports indicate that Germany may drop their attempts to have Greece have an early rescheduling of their debt as a condition for any new aid package. A major credit rating agency put Japan on a sovereign debt watch for a possible ratings downgrade. Japanese Industrial Production during April was up 1.0%, lower than market forecasts. German Unemployment during May was 7.0%, in-line with expectations. Euro zone Inflation during May was up 2.7% year-on-year, lower than projections. Major US economic numbers this morning will include a private survey of US Home Prices at 8:00 AM, a private survey of Chicago area Purchasing Managers at 8:45 AM, and a private survey of US Consumer Confidence at 9:00 AM.
GOLD MARKET FUNDAMENTALS: The gold market managed another new high for the move overnight, with the June gold contract reaching the highest level since May 4th in the early Tuesday US trade. Apparently a slightly improved outlook for Japanese manufacturing and decent Euro zone economic readings have provided a somewhat positive macro economic backdrop this morning, which might be accentuated by renewed strength in energy prices. With the Dollar also falling to the lowest level since May 6th, the gold market is probably benefiting from the overnight currency market action. Unfortunately, for the bull camp in gold, US gold prices this morning might be somewhat restrained by weakness in Indian gold prices overnight. Some traders are suggesting that the prospect of weak US scheduled numbers later this morning could kick up the currency related support for gold, but that line of reasoning would seem to conflict with the positive initial reaction in gold prices last night to the hope that some idled Japanese manufacturing was poised to get back on its feet. Comex Gold Stocks were 10.875 million ounces down 271,824. Comex Gold Stocks are at the lowest levels since 09/27/2010. Comex Gold stocks are at the lowest in the past 10 readings. The Commitments of Traders Futures and Options report as of May 24th for Gold showed Non-Commercial traders were net long 213,515 contracts, an increase of 18,535 contracts. The Commercial traders were net short 259,797 contracts, an increase of 20,177 contracts. The Non-reportable traders were net long 46,282 contracts, an increase of 1,641 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 259,797 contracts in gold. This represents an increase of 20,176 contracts in the net long position held by these traders.
SILVER MARKET FUNDAMENTALS: The silver market appears to be caught up in a positive early wave that has also served to lift gold, equities and energy prices. A weaker Dollar is also serving to lift silver prices, which are probably garnering some positive vibes from hopes of improved physical demand for some commodities in the face of more positive Japanese manufacturing talk overnight. Some players even think that gold and silver are deriving some lift from talk of a possible deal that would allow Greece to cut its value added tax, which in turn is thought to be a stimulus to that troubled economy. Comex Silver Stocks were 101.428 million ounces down 383,025. Stocks have declined 12 of the last 20 days. The Commitments of Traders Futures and Options report as of May 24th for Silver showed Non-Commercial traders were net long 24,246 contracts, an increase of 180 contracts. The Commercial traders were net short 43,120 contracts, an increase of 883 contracts. The Non-reportable traders were net long 18,875 contracts, an increase of 705 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 43,121 contracts. This represents an increase of 885 contracts in the net long position held by these traders.
PLATINUM: The platinum market managed a distinct range up extension this morning and in the process the July contract reached the highest level since May 5th. Apparently the market is benefiting from hope that some Japanese manufacturing might be set to restart and that in turn is seen as a direct benefit to platinum demand expectations. Keep in mind, the platinum market has tracked tightly with global auto sector developments and therefore it is possible that some fresh buyers are stepping into platinum off hopes of increased physical demand ahead. There was a minor supply side setback overnight in platinum, but this morning’s attention seems to be fixated on the demand side of the equation. The Commitments of Traders Futures and Options report as of May 24th for Platinum showed Non-Commercial traders were net long 21,961 contracts, a decrease of 1,159 contracts. The Commercial traders were net short 25,095 contracts, a decrease of 1,264 contracts. The Non-reportable traders were net long 3,134 contracts, a decrease of 104 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 25,095 contracts. This represents a decrease of 1,263 contracts in the net long position held by these traders.
Silver: Even With Contract Highs, It Does Not Look Over Yet
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Despite forging a pattern of new contract highs recently, the upside track for silver doesn’t appear to have run its course just yet. With gold prices persistently posting new all time highs and the gold market typically dominating the headline coverage in the precious metals complex, we think that silver has yet find a level that will diminish demand and increase supply. In fact, the recent pattern of daily silver exchange stocks has continued to show a tightening of supply, and that would suggest to us that investors are still piling into silver and that high prices haven’t enticed physical holders into liquidating. Recent news that Indian officials think that 2011/12 will see a 50% increase in silver imports to as much as 1,200 tons is probably justification for a continued move back toward the all time highs, just above $50.00 an ounce. With at least three global mints seeing demand for silver coins outrun their capacity to deliver, it is clear that even smaller investors are getting involved.
Some players might suggest that having small investors move into silver is a sign of that the market is putting in a top, but in this instance the ongoing involvement of investors from India, China and other developing countries suggests that the interest in silver is likely to carry on longer than would have been the case in the “old world”.
With both the US and Euro zone potentially locked in a death struggle over debt issues and the uncertainty from that situation dramatically undermining some safe haven instruments, it wasn’t surprising to see both silver and gold range up sharply in the wake of the S&P credit rating warning to the US. Relatively speaking, the amount of investment money dedicated to silver ETF’s is still only 1/10 of the amount of capital invested in Exxon.
We think that traders need to be on the lookout for a decline in silver exchange warehouse stocks below the 100 million ounce level, as that could spark the next wave up in prices to the $45.00 to $49.00 level. In short, until the high level of uncertainty toward global debt is tamped down and the threat of inflation has been moderated, we suspect that silver prices will be poised to march even higher. However, with such high historical prices, those looking to enter silver should be prepared to weather and overcome extreme volatility.
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Energy Complex Lifted by Low Product Stocks & Weak Dollar. New Highs In Gold
Mostly positive bias in the physical commodity markets this morning. New all-time highs in gold and a big range down move in the US dollar. There was a dryer pattern developing into early May for planting yesterday, but models are showing heavy precipitation into May 4th & 5th time frame. Energy complex is lifted by the lowest product stocks since 2008 and the weaker US Dollar.
Gold & Silver: If Gold Rallys Off Positive US Numbers, It’s Looking At Inflation Propects
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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Euro were generally stronger during overnight trading, early indications are for the US stock market to open today’s session with sizable gains. The Dollar is weaker against most of the major currencies during overnight trading, although posting a gain versus the Yen. Spain was able to auction 3.4 billion Euros worth of longer-term bonds, with good levels of demand from the market. The Swedish central bank raised benchmark interest rates in that nation by 0.25%, the sixth time they have done so in the past 10 months. The Japanese Trade surplus during March was 196.5 billion Yen, lower than expected. German PPI during March was up 6.2% year-on-year, lower than forecasts. Major US economic numbers to be released this morning include March Existing Home Sales at 9:00 AM, and a private survey of mortgage applications released during the session.
GOLD MARKET FUNDAMENTALS: Outside market forces have once again shifted to favor the bull camp, as the US Dollar is weaker, energy and commodity prices are higher and even equities are showing noted strength in the early US Wednesday morning trade. Apparently the gold trade prefers to see favorable US economic numbers and the trade generally expects to see a somewhat positive existing home sales report later this morning. Gold did not seem to be undermined by hints of aggressive austerity cuts from the US Treasury Secretary yesterday and gold also doesn’t seem to be undermined by growing talk that the Fed is preparing for a change in policy. With June gold rising through the $1,500 mark this morning that might spark a wave of media coverage that could fan bullish dialogue and eventually talk of an overbought condition. However, seeing higher equities, grain, energy and industrial metals price action overnight, would seem to favor the bull camp to start this morning. The gold market also saw a downward revision in 2011 gold production estimates from Polymetal a Russian miner. The trade was apparently tossing around rumors of a possible take over of Harmony gold but that talk was discounted by company officials. In the end, residual concerns from the US credit rating story early in the week appears to have sparked a wave of investment flow toward gold and that flow apparently isn’t discouraged by a recovery in US equities. Traders will be watching the gold market reaction to the scheduled US numbers closely this morning as the ability to rally again off positive US economic readings, suggests that the gold trade isn’t focused on the prospect of rising rates, but instead the market is focused on the prospect of inflation. Comex Gold Stocks were 11.089 million ounces up 5,300 ounces. Gold stocks have declined 12 of the last 20 days.
SILVER MARKET FUNDAMENTALS: The silver market continued to flash higher overnight, as the metals markets are being presented which a much more upbeat outside market environment this morning. In addition to positive equity market action, the silver trade is also seeing supportive currency market action, rising oil and physical commodity prices and at least in the early action today, the trade thinks that the US will see somewhat positive economic readings. Not surprisingly, the silver market seemed to mostly discount news overnight that Hochschild Mining was on track to reach its 1st quarter 2011 silver production target, perhaps because the silver market also saw evidence of a noted decline in silver output from a Russian silver mining operation. Polymetal saw a noted year over year quarterly decline in silver production of 23%, but recently the silver market has been more concerned with demand prospects, than with changes in physical supply. With the recent strength in silver and the markets recent out performance of the gold market, the headlines are starting to fill up with predictions of a return to all time high silver prices. Comex Silver Stocks were 103.120 million ounces up 300,345 ounces. Silver stocks have declined 15 of the last 20 days.
PLATINUM: The platinum market is showing some positive action this morning but it would appear that the market is having trouble keeping pace with gold and silver price action. Perhaps the platinum market is being held back by its industrial standing as the global auto industry is still being threatened by supply chain disruptions and fears for the Japanese economy. In retrospect, the platinum market seems to be caught in a $1,801 to $1,775 trading range in the July contract, even though the rest of the metals complex is in overdrive. The path of least resistance is pointing upward but platinum appears to be the weakest link in the metals complex.
Metals: Wild Gyrations Today as Precious Metals Confront Slowing Fears
by Dave Hightower on August 5, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe were generally weaker during the overnight session, early indications are that US equity markets will open with moderate losses later on today. The US Dollar is weaker against most of the major currencies this morning. Early indications are that the Bank of Japan sold 4.5 trillion Yen during yesterday’s intervention, a record amount. Germany, France and Spain are scheduled to have talks concerning the financial markets later on this morning. The French Trade deficit during June was 5.6 billion Euros, a smaller deficit than expected. A private survey of UK Housing Prices was up 0.3%, slightly higher than expectations. The UK PPI during June was up 5.9% year-on-year, in line with forecasts. Major US economic numbers to be released this morning, include July Non-Farm Payrolls, July Private Payrolls and July Unemployment at 7:30 AM.
GOLD MARKET FUNDAMENTALS: According to international press coverage, the world is expressing its displeasure with global leaders by selling stocks and buying flight to quality instruments. An equal portion of the press lays the blame of sharp equity market losses this week on the weak global economy, which in many cases is made out to be even more precarious because many governments and central banks are thought to be handcuffed by debt and policy restrictions. The gold market saw a round of higher gold price forecasts floated again overnight, but the market was also presented with news of a double digit month over month increase in Chinese gold production overnight. While the Chinese gold production gain might have a negative impact on gold pricing in normal market conditions, heightened anxiety and the lack of alternative flight to quality instruments probably means that the gold trade will give classic supply side stories little attention. Some gold bulls are a little concerned with gold’s temporary setback yesterday, as that action seemed to be partially tied to the broad based washout in commodities. In other words, the idea that a slower economy is bullish to gold, was at least temporarily challenged yesterday and therefore some traders will be watching gold’s reaction to the US numbers this morning very closely. While the dollar managed another new high for the move overnight, it was unable to hold those highs and into the US open today, the dollar was actually below yesterday’s closing level. In the end, it is possible that currency action yesterday was at least partially responsible for the mid day weakness in gold. Comex Gold Stocks were 11.440 million ounces up 7,204 ounces. Stocks have declined 13 of the last 20 days. Comex Gold stocks are at their highest levels in the past 10.
SILVER MARKET FUNDAMENTALS: As in gold, the trend in silver is widely expected to continue pointing to the upside, but given the sharp gains and the propensity for volatility, traders should brace for a very active end to the trading week. With the trading range yesterday in September silver a rather robust $3.82 an ounce, many traders are suggesting that silver reached a critical junction. With gold and silver prices seemingly being bulled down by slowing fears and broad based physical commodity market liquidation at times yesterday, it seemed as if silver temporarily lost its flight to quality standing. Therefore a large portion of the trade today, will be keen to measure the resolve of the flight to quality bulls, in the wake of the US payroll report this morning. In other words, seeing silver weaken in the face of slack payroll readings, could signal a crack in the bull’s foundation. Some traders also think that a decent number from the US today, could dampen flight to quality sentiment for silver and therefore opinions are diverse and conflicted into the key payroll report release. Comex Silver Stocks were 105.297 million ounces down 459,420 ounces. Silver stocks have increased 14 of the last 20 days.
PLATINUM: The platinum market has already rushed to factor in at least a portion of global slowing this week, as October platinum prices to the overnight low were as much as $122 an ounce below this week’s highs. To the overnight low, October platinum prices were also $211 an ounce below this year’s highs and therefore platinum is being seen as a physical commodity market facing slowing ahead. However, October platinum has now returned to a level of $1,675 on the charts, which has managed to hold up the platinum market up on 4 separate and distinct occasions over the last 11 months! There was a fresh labor issue in South Africa overnight, but the market doesn’t look to garner much in the way of fresh buying, off minor and perhaps temporary supply side threats.