OUTSIDE MARKET DEVELOPMENTS: With a number of equity market measures seemingly poised to forge more new highs for the year again this morning, favorable OECD economic forecasts and news of increased Chinese bank lending activity overnight, it would appear that a world recovery view is still being embraced by most markets. With the addition of more new lows in the Dollar this morning, the bull camp in gold and silver would seem to have plenty of arguments in their camp. It would not seem like classic inflation arguments were a primary bull theme this week, but some bulls might latch onto the inflation threat that was fomented by an ECB official overnight. Apparently an ECB official suggested that raising interest rates can’t wait until after inflation rears its head and that seems to keep the inflation beat alive in the absence of classic inflation signals. While the markets will be presented with US Import/Export prices and a US Wholesale trade figure this morning, the most critical economic report for the markets today might be the Michigan Consumer sentiment report.
GOLD MARKET FUNDAMENTALS: Apparently the gold trade is capable of discounting some potentially bearish demand news from India overnight and that would seem to suggest that the focus of the gold trade remains on big picture macro economic issues, as opposed to classic internal supply and demand side issues. With favorable Chinese Bank lending activity reported overnight and the gold market recently seeing support off hope for consistent gold demand growth from China, it is possible that the gold trade was distracted from the talk that high gold prices might serve to dent Indian seasonal demand ahead. With the Dollar showing persistent weakness again this morning, the gold market is apparently anticipating more fund buying interest ahead and without deterioration in the global recovery view, gold and other physical commodity markets will probably continue to benefit from the action in the equity markets. In the current market, the bear camp needs something to derail the recovery expectation or the bears might have to hope for periodic technical weakness.
