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Once again Indian gold prices showed some initial strength, but that strength didn’t seem to carry forth into other international gold markets.

OUTSIDE MARKET DEVELOPMENTS: While the US Dollar is only marginally weaker in the early going today, the markets seem to be expecting a further deterioration in the US economic numbers today and perhaps some renewed weakness in the US Dollar as a result of the data flow. In addition to a private report that that hinted at poor retail sales activity over the prior weekend, the markets also saw confirmation yesterday that US housing numbers continue to weaken. With an extremely active US economic report slate today ahead of a holiday closure on Thursday, one might expect to see a bit of increased price volatility in the Dollar and in turn in both gold and silver prices. Collectively it would seem like the trade expects to see generally weak data from durable goods and Personal Spending, but the market will also seen initial claims and Personal Income readings. With oil prices showing moderate weakness this morning, one could suggest that part of the supportive outside market impact on precious metals prices from the weaker Dollar could be countervailed. However, recently the influence on gold and silver prices from the US Dollar seems to have easily trumped countervailing action from other outside markets.

GOLD MARKET FUNDAMENTALS: Indian gold attempted to firm overnight but it seems as if demand concerns continue to undermine sentiment in that market. In looking at the pattern of lower highs in the US gold market over the last several trading sessions, one could also suggest that demand concerns are also influencing US gold prices. However, one could also note that the Dollar has failed to give off a definitive direction lately and that has left some gold traders flat footed in the market. On the other hand, with an extremely active slate of US economic data due out this morning and many of the expectations calling for the data to highlight further slowing evidence, the Dollar might see a slight increase in selling pressure this morning. With a number of markets closed overnight, the initial action in US gold prices this morning should probably be discounted somewhat. However, the recent pattern has been for gold prices to slide into and through scheduled US data flow and since there is a holiday on Thursday, the amount of US data this morning has been markedly expanded. In the end, the bulls hope to buy gold today off renewed US Dollar weakness, while the bear camp probably wants to sell gold because of the latest breakdown in oil prices.

TODAY’S GUIDANCE IN GOLD: A weaker downward bias is in place on the charts and we suspect some follow through in the lead up to the scheduled US data. In the near term, the direction of gold prices will be heavily dependent on the magnitude of weakness in the Dollar, but the fear of too much slowing is also going to remain a bearish force in the background for much of the coming two weeks of trade.

SILVER MARKET FUNDAMENTALS: The silver bulls will point out a pattern of lower highs and lower lows this week on the charts, while the bull camp will suggest that the silver market has held together rather impressively in the face of persistent evidence of moderate slowing in the global economy. However, like the gold market, the silver market continues to divide its attention between the action in the Dollar and the overall weak state of the global economy. The bull camp might be somewhat cheered on by the slight decline in silver exchange stocks seen overnight, but that issue has lost some importance lately, due to periodic daily single day stock builds over the last two weeks. It is also possible that part of this week’s declines in silver prices have been partly the result of weakness in equity prices, weakness in oil prices and fresh new contract lows in copper prices. In other words, silver has at times tracked tightly with gold prices and has given off the impression of being primarily a financial commodity, but at the same time, fresh new lows in a host of physical commodity prices is probably something that is being noted by a moderate portion of the silver trade.

TODAY’S GUIDANCE IN SILVER: It would appear like the silver market is poised to see a test of the $10.00 level on the charts. In fact, in the face of weak US economic readings and some additional declines in the US equity market, a temporary slide below $10.00 is probably likely this morning. In other words, unless Dollar weakness becomes significant and anxiety starts to lift the gold market again, we suspect that silver will act like a physical commodity market facing a recession today.

This content originated from – The Hightower Report.
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