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LONDON STATS: London Gold Fix $772.75 -$.75 LME Copper stocks 292,975 tons +200 tons
COMEX STATS: GOLD stks 8.519 ml oz +9,522 oz SILVER stks 129 ml oz +78,292 oz
OUTSIDE MARKET DEVELOPMENTS: With the markets widely anticipating a series of large rate cuts from the ECB and the BOE today and the markets seeing a very aggressive UK and Swedish rate reduction, it wasn’t surprising to see the precious metals markets attempt a minor bounce off this week’s lows. It should be noted that in the wake of the UK rate cut gold did see a slide of roughly $4 an ounce. In retrospect the precious metals markets would appear to be lucky to have had somewhat favorable US equity market action this week, as the flow of disconcerting scheduled economic data has been quite prevalent. In fact, the precious metals markets have also weathered persistent weakness in energy prices this week and yet the markets haven’t seen that much spillover weakness. In fact, the gold and silver markets seem to be showing slightly positive action this morning, despite a firmer Dollar and that also seems to suggest that the precious metals markets are in general discounting the outside market forces. The US economic report slate is more active today, with initial claims and Factory orders reports, but the markets will also be presented with another round of US auto sector testimony to Congress and that could also impact prices later in the trading session.
GOLD: While February gold has seemingly managed to forge a minor layer of consolidation support above the $764 level, the gold market still seems to be paying a lot of attention to the direction of the US equity market and perhaps a little less attention to the action in the currency markets. With a slight up tick in Russian Gold and Currency reserves noted in the weekly figures overnight, it is possible that the market will discount comments from Putin that Russian gold and currency reserves will allow for a soft landing in the Russian economy. In other words, the gold market might have to worry about Russian gold sales for use in battling financial threats to the Russian economy. In another potentially undermining news story, the Chinese were giving off signs of rising gold output figures for 2008 but that story isn’t exactly fresh. From the recent action it would appear that the gold trade is generally concerned about severe slowing and therefore the outcome of the US auto maker talks today could be another issue that influences gold prices in the coming 36 hours of trade. In fact, the macro economic question is perhaps doubly important to gold prices, as the lack of significant macro economic turmoil could result in a setback in the Dollar, while a ratcheting upward in turmoil looks to strengthen the Dollar. With the gold market giving some ground in the face of confirmation that the BOE reduced interest rates by 100 basis points this morning it is clear that the bulls might need to look to some other angle to support their case today.
SILVER: The silver market has basically coiled for most of this week and considering the weakness in other physical commodity markets this week, the bull camp in silver has to be given some credence. However, with silver and gold prices unable to bounce in the aftermath of another large rate cut from the Bank of England and in the wake of a large cut from the Swedish Central bank, it would appear that the silver market hasn’t been able to completely shake off the ongoing threat of severe slowing. In another potentially undermining development, the recent pattern of declining silver exchange warehouse stocks seems to have paused this week and with persistent weakness in copper and energy prices also seen this week, the outside market forces seem to remain bearish for the silver trade. On the other hand, the silver market is probably seeing some indirect support from the fact that US equity prices this week have been able to climb, despite the presence of negative economic news flow. Some traders are even suggesting that the coiling action in silver over the last two months, hints at a major decision ahead and with the ultra critical US payroll report due out on Friday morning, it is possible that some form of trend decision will be seen in the coming two trading sessions.
