OUTSIDE MARKET DEVELOPMENTS: With the Dollar reaching the highest level since March 18th in the early morning action today, equity prices sharply lower and a host of physical commodity markets under noted pressure, one gets the sense that the outside market forces are weighing heavily on precious metals prices into the US opening today. One almost gets the sense that the US auto sector uncertainty has rekindled concerns of too much slowing. In fact, it would almost seem like sentiment has shifted away from inflation and back in the general direction of deflation. Surprisingly the gold market didn’t seem to give much credence to an attempt to rally Indian gold prices overnight. Even more surprising is that gold was also unmoved by the sharp gains in the Yen, which in the recent past has been a sign of increased flight to quality anxiety. Perhaps the gold market is seeing some weakness off fears of the upcoming G20 meeting, which some traders think might result in some renewed talk of gold sales from that entity. With the US scheduled to release a regional Fed manufacturing reading this morning and the concern for the US auto sector already dominating the headlines overnight, it is likely that the metals trade is simply fearful of a negative reaction to the US data flow this morning. In short, the outside market bias seems to be favoring the bear camp in the early going today.
GOLD MARKET FUNDAMENTALS: The bull camp has to be a little disappointed with the weaker price track early this morning, as one might have concluded that macro economic uncertainty was on the rise again. However, with a G20 meeting later this week and some players fearful of G20 gold sales talk surfacing this week, there would seem to be a number of potential bearish fundamental events looming ahead for the gold market. While the bulls will point out ongoing record ETF gold in trust holdings, the bear camp will point out that June gold prices to this morning’s low are already almost $100 an ounce below the February highs and that could be turning up the pressure on all gold longs. With the June Dollar Index showing signs of regaining its footing and the fear of severe slowing returning to the marketplace, it would seem to be much easier to embrace the prospect of deflation, than to embrace the threat of inflation. Just to add to the bearish early tilt in gold prices, the gold market was also presented with news of rising 3rd quarter gold production at Gold Fields, but some of that influence might have been known in the market at the end of last week.