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OUTSIDE MARKET DEVELOPMENTS: While the Dollar is weaker this morning and oil prices are higher, the gold and silver trade doesn’t seem to be in a position to benefit as fear and anxiety are on the decline. Clearly the upward extension in the equity market is the main force behind the weakness in the precious metals markets. After months of assuming the worst for the global economy, it would seem as if a number of markets are beginning to pull forward the recovery date and that in turn seems to have discounted the prospect of US government default and other very dire outcomes. While a number of physical commodity markets are seemingly “re-inflating” because of the improved macro economic view, so far the precious metals markets don’t seem to be benefiting from inflationary prospects. With the US scheduled economic report slate today somewhat thin and the report slate for the holiday shortened week also rather thin, the gold and silver trade might not see much of an impact from the numbers this week. In fact, given the second and third tier reports scheduled for this week, it is unlikely that the number flow will be able to unseat the dominance of the action in the equity markets.
GOLD MARKET FUNDAMENTALS: Despite seeing some price induced Indian buying overnight the gold market remains weak into the US trading session this morning. With the Dollar, Yen and Treasuries all lower this morning and the gold market following that pattern in the early action, it would certainly seem like a downgrade of safe haven instruments is underway. Weakness in South African mining shares, a decline in Gold ETF holdings and lingering optimism toward paper assets certainly seems to have created a bearish environment for gold into the US opening. With June gold falling to the lowest level on the charts since January 23rd, it is clear that sentiment is favoring the bear camp into the US action. With the last COT positioning report showing the Non-Commercial and Non-reportable net positioning to be holding a net long of 197,585 contracts as of March 31st, it was clear that the market was vulnerable to long liquidation selling, especially since June gold fell below key chart points of $900 and has also fallen to the $875 level early today.
