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OUTSIDE MARKET DEVELOPMENTS: While the Dollar is somewhat weaker in the early action today, the currency markets seem to be in somewhat of a narrow trading range in the early going today and therefore they may not offer up much direction to the gold and silver trade today. With a number of international markets closed due to the May Day holiday, the overnight direction in prices might be somewhat misleading. However, with global equity prices at least initially showing more positive action, both gold and silver players might be fearful of more long liquidation by the flight to quality crowd again today. The US scheduled report slate today is pretty active early in the session, with Michigan sentiment readings, the ISM manufacturing readings and US Factory orders all due out. The trade initially expects two of the three US reports to come in with positive readings on the economy and prior to this week that would have been cause to lift gold and silver prices. However, this week the gold and silver trade seemed to think that better US numbers were cause to extract further safe haven premium from both gold and silver prices.
GOLD MARKET FUNDAMENTALS: In looking at the overnight headlines there are several reports of higher gold production from producers and at least one instance of a gold miner looking to raise money to increase future output. Countervailing the talk of rising gold production is a prediction from a Barrick executive that global gold production will continue to decline because of maturing mines and a lack of fresh discoveries. Therefore, the classic supply side influences this morning look to be only slightly negative and perhaps overshadowed by other themes. Clearly some investors are feeling the pressure of the weakness in gold prices this week, especially with the overnight lows in June gold coming in almost $40 an ounce below this week’s highs. Given the generally bearish tone in the gold market this week, off big picture macro economic issues, the gold trade seems to be set to discount somewhat favorable Indian festival demand news that was seen this overnight.
