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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe were generally higher during overnight trading, early indications are that US equity markets will open with substantial gains later on this morning. The US Dollar is sharply lower against most of the major currencies this morning. An Italian newspaper is reporting that Italy may receive a 600 billion Euro loan from the IMF if their debt problems get worse, although the IMF later denied that report. Belgium has passed a new austerity budget and may be closing in on forming a new government. A major credit rating agency warned that the current debt crisis could threaten the sovereign debt ratings of all Euro zone nations. The only major US economic number to be released this morning will be October New Home Sales at 9:00 AM.
GOLD MARKET FUNDAMENTALS: With an initial risk on vibe in place, precious metals and a host of physical commodities are starting off the week on a very positive track. In addition to sharp overnight gains in equities, noted strength in the Euro and calls for a wave of global stimulus, the bull camp in gold might be embracing a number of potentially bullish themes. However, the back bone of the bullish vibe today seems to be hope that the IMF might be poised to help Italy with as much as 600 billion Euros and that would certainly seem to be a large enough backstop to quell debt fears from Italy. With the reversal of last week’s vulnerable stance in gold, it is also possible that gold is seeing some classic short covering buying interest this morning. With the rise this morning, December gold has reached up to the highest level since November 21st and that might be the result of a measure of short covering. However, given the action in equities and the broad based price gains being seen in a number of physical commodity markets this morning, there might also be some justification for fresh outright buying of gold. With the gains starting in Asia and the Asian trade pointing to hope for Italian debt relief, commentary from the IMF might be critical for gold this week. It is also possible that part of gold’s gains today are the result of OECD calls for global stimulus, as several countries including the Euro zone, might be poised to reduce rates in an effort to cushion the world economy against Euro zone affairs. Others have even suggested that the US and UK need to launch additional QE measures as austerity in the UK and forced spending cuts in the US are expected to be a check on future growth rates. Some gold players might be buying gold off hopes that this Friday’s US Non Farm payroll reading will contribute to the risk on view. News that a major gold producer saw some reduced output probably isn’t contributing significantly to the bullish vibe this morning.
SILVER MARKET FUNDAMENTALS: While the gold market has forged a noted upside breakout overnight, December silver as of this writing wasn’t able to rise above the Friday highs. However, a broad based physical commodity market rally and significant gains in equities have fostered a favorable environment to start today and December silver has forged an early gain in excess of $1.00 an ounce. Some players even suggest that massive voter turn out in the Egyptian election is contributing to the optimism today. With a weaker dollar and hopes for another “European Plan” to contain the debt contagion, silver is seeing a number of optimistic tracks in the headlines this morning. However, for December silver to catch a definitive wave of technical short covering buying, might require a rise back above last week’s highs around the $33.04 level. In the near term, calls for global stimulus from the OECD and ideas that the IMF could ride to the rescue, have calmed frayed nerves and given the risk on crowd a temporary but suspect edge. The ultra bulls in silver might also suggest that silver is drawing some buying interest from hopes of a decent gain in US Non Farm payrolls at the end of this week.
PLATINUM: Platinum is catching some lift from the strong gains in gold prices overnight. However, gold seems to have caught a lot of initial support from favorable Asian hopes for the Euro zone. A weaker dollar and sharply higher equities also gives the platinum bulls some hope this morning. With January platinum to the lows Friday, sitting as much as $67 an ounce below last week’s highs, it is possible that a portion of today’s initial rise is indeed technical short covering buying. However, with calls for global stimulus from the OECD overnight, a bullish tilt toward the Euro zone situation and very positive US holiday sales talk, platinum is seeing a very favorable physical commodity market environment to start the new trading week. Initial support in January platinum is seen down at $1,558 and there might not be much in the way of resistance until the quasi double top of $1,574.
Metals: The Gold Market Appears to Lack a Definitive Opinion
by Dave Hightower on February 2, 2012
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: Asian equity markets were generally stronger this morning, off mostly up beat data flows. However, European equities were mixed to slightly weaker overnight off some softer than expected guidance from a couple multinational heavyweights. In the early action today, US equities were showing mixed action, and it would appear that the US market is looking for some guidance from scheduled data or perhaps from a series of Fed speeches later today. From the US scheduled data front, the markets will be presented with a private layoff report early on and that will be followed by weekly claims figures, which are expected to post a minor decline. While the market will also see a US Productivity reading, the trade doesn’t think that today’s Productivity readings are likely to have a noted impact on Fed policy. It is also possible that a series of Fed speeches/testimony could have an impact on precious metals and physical commodity markets during the session today. A portion of the trade thinks the Fed will hint at more assistance for the US economy.
GOLD MARKET FUNDAMENTALS: At least to start today, the gold market appears to lack a definitive opinion, even though Asian stocks were higher and the S&P seemed to have somewhat positive views toward the potential track of the European economy. In fact, S&P suggested that the odds were tilted in favor of a mild European recession/slow recovery and that is certainly a better proposition than the hard landing or worse fears that dominated the European landscape off and on for the last 12 months. Gold might have been partially undermined by predictions of a slight decline in Indian gold imports for the month of January versus year ago levels, especially after the Indian gold price peg was lifted earlier this week. However, gold reportedly saw some improved demand in Asia overnight but that might have been catch up action to the gains forged in the US Wednesday gold trade. Some traders think the $1,750 level has become a pivot point in the April gold contract, but others think gold will need to see more gains in the Euro and or gains in US equities today just to put the bull camp in definitive control of gold prices. It would seem like gold prices have continued to mostly track physical commodity market fundamentals and therefore the claims figures today might serve to set the tone of prices for the Thursday morning US trade. Comex Gold Stocks were 11.493 million ounces down 964 ounces. Gold stocks have declined in 12 of the last 20 days.
SILVER MARKET FUNDAMENTALS: The March silver contract continued to consolidate in the overnight action and to the bear camp that hints at a loss of momentum. However, the bull camp might spin the consolidation action into a positive by suggesting the market is simply building a base above $33.00. Like gold, silver continues to track classic physical commodity market fundamentals and that means the bulls need a stronger Euro and something positive from US scheduled data and or from the US Fed. However, in the early action today silver seems to be lagging relative to gold and platinum prices and that might embolden some in the bear camp. In fact, silver seems to be tracking closely with copper and that could suggest the silver trade might be looking for direction from US claims and from the US equity markets. Some silver bulls are hopeful that dialogue from various Fed sources today will serve to provide some fresh lift to silver prices. Comex Silver Stocks were 128.983 million ounces up 312,407 ounces. Silver stocks have increased 14 of the last 20 days.
PLATINUM: The platinum market has also shown some consolidation action of late but prices enter the Thursday US trade within close proximity to this week’s highs. It would also seem like platinum is tracking with gold instead of silver and copper and that might mean platinum could be less dependant on the scheduled data than some might have expected. Platinum might be garnering some support from news that labor conflict has continued at Impala, with that company reportedly firing up to 13,000 workers who participated in what was ruled to be an illegal strike action. A critical pivot point might be seen in April platinum at $1,616 but the early action seems to hint at a possible return to the highest levels since November 15th on the charts.