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OUTSIDE MARKET DEVELOPMENTS: While the Dollar has settled into a slightly lower bias in the early Wednesday trade, the Greenback did manage a fresh but fleeting new high for the move in the overnight action. With slightly higher initial equity market action, it would seem like the concern for Dubai and Greece from the prior trading session have been tamped down a bit. However, it would not seem like the Dubai situation is as stabile as it was at the end of last week. It does seem as if a favorable outlook from Texas Instruments overnight has provided the stock market with a measure of support today, but it is also possible that a US Administration offering to reduce capital gains taxes to small businesses yesterday is also serving to improve macro economic sentiment this morning. Some traders suggested that plans to use TARP funds for a jobs program should have been supportive to gold and silver as that move could increase the deficit and it could also help the economy recover. In the action today, the market will see a US Wholesale Trade report that is expected to show a slight contraction, but that report isn’t expected to be a big driver of gold and silver prices. The markets will also see another US Treasury auction cycle at mid session, but the first leg of the auction didn’t seem to have a pronounced impact on metals prices yesterday morning.
GOLD MARKET FUNDAMENTALS: At least in the early action today, February gold has managed a noted recovery bounce of roughly $17 an ounce off the early lows. While the bulls will suggest that bargain hunting buying is providing some lift to gold prices this morning, it would also seem like the market is getting a minor lift from outside market action and also because of a slightly improved macro economic environment. Perhaps the market is being lifted by Indian predictions of an increase in December Indian gold imports, but in the end, the outlook for gold prices looks to sit with big picture macro economic expectations. In fact, in the wake of renewed Dubai/Greece financial concerns yesterday, it certainly seemed as if gold came under renewed selling pressure and that would seem to link gold and equity prices tightly together again today. Certainly evidence of physical buying by either India or Chinese interests would provide support to gold, but in order to return to bull market status, the market might need a definitive improvement in overall macro economic sentiment that in turn would probably be confirmed by higher equities and a lower US Dollar. It is possible that talk of an exit map from ECB officials overnight is a limiting development for gold, as indirect threats of removing stimulus could be seen as a precursor to tightening action. In the end, gold appears to have become a physical commodity in need of more salient growth expectations.
SILVER MARKET FUNDAMENTALS: Unlike the gold market, the March silver contract managed a fresh new low for the move before rejecting that move. With slightly higher initial equity market action and a modestly lower US Dollar, the outside market forces seem to be favoring the bull camp in silver early today. However, it would seem like the silver market is getting a large measure of support from the higher equity market action this morning and therefore silver traders should monitor that action very closely today. While copper and energy prices are also showing some minor positive trade early in the session today, those moves weren’t definitive enough to confirm a broad based buying interest has returned to the physical commodities. Since silver prices seemed to come under aggressive pressure in the wake of the resurfacing of Dubai credit concerns yesterday, traders should continue to monitor the headlines for anything new on that subject.
PLATINUM: Like silver, platinum also saw a fresh new low for the move overnight but then managed to reject that slide. While we think that platinum is capable of a bounce today, the early equity market gains have to hold and possibly extend to have any hope of sustained gains in platinum in the days ahead. In short, view the gains today as short covering balancing, instead of a signal of a true bottom.
