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OUTSIDE MARKET DEVELOPMENTS: The Dollar is markedly higher again this morning and given the initial equity market reaction to key US earnings reports, one gets the sense that flight to quality players in gold and silver are poised to be disappointed. While the corporate earnings reports weren’t exactly stellar, it seemed as if the equity markets generally saw the news to be favorable to future economic conditions and that in turn seemed to turn up the pressure on gold and silver prices early this morning. While gold and silver prices have recently faded in the face of scheduled US data, there seems to be an expectation this morning that the US consumer sentiment readings might actually come in better than expected. However, the reaction in gold and silver prices to a much better than expected sentiment reading is difficult to predict, as the early negative bias in metals prices seems to be somewhat entrenched and the metals markets interest in playing up inflation, off good economic readings hasn’t exactly been that impressive lately. While positive action in the equity markets has also provided periodic support to gold and silver prices, the early recovery in equity prices this morning didn’t initially seem to benefit the metals.
GOLD MARKET FUNDAMENTALS: The gold market might have been in a position to get some light spillover support from Indian gold market dialogue overnight, but apparently the overt strength in the US Dollar and the failure to see something negative from the US financial sector earnings flow early today has simply undermined the gold market into the US session. In fact, with reports overnight that India began importing gold again, the US gold trade was potentially set to play up the idea that lower gold prices could spark a pick up in demand. However, the outside market forces seem to have gold prices on the run in the early action today and with the June gold contract approaching the potentially critical April 6th spike low of $865, the bears would seem to have a slight technical edge at the start of the trading session. The bear camp will have to watch out for the gold markets reaction to the US consumer sentiment readings, especially if the rumors of a big jump in that report come true. In another potentially undermining development, the press is documenting a slight decline in gold ETF holdings in trust and that would seem to be a factor that adds to the downward bias. Some traders suggest that the weakness in gold this morning is largely the result of increased risk appetites pulling money from gold for potentially better results in the equity markets.
