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OUTSIDE MARKET DEVELOPMENTS: While the precious metals and physical commodity markets could have been cheered by the US Fed’s decision to leave interest rates on hold yesterday, the action in the Dollar seems to have taken center stage. One also gets the feeling that the markets remain fearful of upcoming US rate hikes, while others are suggesting that the failure to tap on the brakes early in the US recovery, is eventually going to allow the recovery to gather a little more momentum. Apparently the currency trade thinks that prospects are brightening, at a faster clip in the US economy and seeing the Fed stay with low rates, would in turn seem to facilitate that argument. As in the equity markets, the Dollar might begin to see favorable US scheduled number flow, as Dollar positive, and until the precious metals markets manage to de-link with the Dollar, that could mean evidence of growth could apply even further pressure to gold and silver prices. With the US scheduled to release initial and ongoing claims, as well as a Leaders and a Philly Fed number this morning there could be enough information out today to test the markets shifting fundamental attitude.
GOLD MARKET FUNDAMENTALS: At least in the near term, the gold market seems to be off balance because of the stellar rise in the Dollar. The bear camp will suggest that a quasi double high up around the $1,142 level is a negative technical signal, while the bull camp might retain some confidence, as long as the February gold contract manages to hold above this week’s consolidation lows of $1,111.70. One might have expected up beat US Fed dialogue on the state of the US economy to be supportive of gold prices yesterday, especially if the on hold stance allows the anemic US recovery to gain more momentum before the Fed taps on the brakes. With slightly weaker global equity prices this morning, it is possible that some classic macro economic type liquidation is being seen in gold in addition to currency related liquidation pressure. Apparently the gold market wasn’t that interested in favorable Indian gold import data released overnight for the first half of December and that in turn highlights the dominance of the Dollar action on gold market sentiment. While the bias appears to be pointing downward in gold this morning, the gold bulls wouldn’t have benefited from US Fed hints at higher rates yesterday. Eventually seeing the Fed remain on hold could be a benefit to the gold bull camp.
SILVER MARKET FUNDAMENTALS: Like the gold market, the March silver contract has also forged a quasi double top on the charts and has fallen back sharply. Clearly the root of the liquidation pressure this morning stems from the ongoing rise in the US Dollar, but it is also possible that weakness in global equities, weakness in copper and even weakness in the energy complex is stoking the bear case into the early Thursday US trade. Since silver avoided the type of historic pricing seen in the gold market over the last several months, it is possible that technical corrective action in silver ahead will be less severe. With silver at times over the last six months, holding back from gains because of its industrial link, it is now possible that favorable US economic numbers ahead might actually serve to provide a measure of support to silver prices. The bear camp is also pointing out the double failure to regain the 50 day moving average earlier this week, while the bull camp is hopeful that consolidation support on the charts down at $17.13 will be able to support this market. While the silver trade hasn’t paid that much attention to the ebb and flow of silver warehouse exchange stocks, the market was presented with a moderately negative rise in silver stocks from yesterday afternoon. On the other hand, since the market doesn’t seem to be paying that much attention to physical supply side developments, it is also possible that the silver trade won’t be able to garner any support from overnight news that Mexican October silver production declined by 5.6% on a year over year basis. Like gold, the silver bulls need to see favorable US numbers ahead to provide an offset the rising Dollar.
PLATINUM: The platinum market also forged a quasi double top on the charts and for the time being a stronger Dollar and weaker equity market trade would seem to give the bear camp the edge. There were some positive platinum demand stories in the press overnight and as we suggested in the gold and silver coverage, a lot worse things could have happened to platinum yesterday than the Fed staying on hold and committing to a quicker US recovery track. In the mean time, we can’t rule out a bit of back and fill down to the $1,431 level.
