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OUTSIDE MARKET DEVELOPMENTS: In retrospect, the bull camp in precious metals markets have to be somewhat disappointed in the lack of flight to quality buying interest last week in the face of a possible revival of financial sector concerns. Apparently the precious metals markets and a host of other physical commodity markets were undermined by renewed slowing concerns and to a lesser degree by renewed strength in the US Dollar. With global equities somewhat lower early this morning and a portion of the trade anticipating slightly slack US economic readings later this morning it would seem like the outside market forces are initially favoring the bear camp. However, the trade did see a rise in the Euro zone CPI readings overnight and that was certainly a change of pace that could have provided some support to gold and silver prices. In looking ahead, the metals trade will see a very active slate of US economic data this week, with a potentially ultra critical US monthly payroll result due in at the end of the week. Into the early action today, slack equities, a weaker Dollar and the prospect of weak US economic readings might mean that the bear camp in precious metals market will have a slight edge.
GOLD MARKET FUNDAMENTALS: While the bull camp is suggesting that the recent correction might bring in some fresh bargain hunting buying into gold, the fear of global slowing still seems to be weighing on a number of commodity markets in the early going today. In fact, the world seems to remain concerned about spillover slowing concerns from the Dubai situation and in the mean time, gold prices seem to have re-established a tight positive correlation with the equity markets. Perhaps the gold market is being supported by talk that the recent correction inspired some Indian retail gold buying or perhaps prices are being supported by talk that a correction in gold prices could bring the Chinese central bank off the bench for additional gold purchases. In the near term, a portion of the trade seems to fear a series of slack US economic readings this morning, while another portion of the gold trade seems to remain fearful of a chain reaction melt down off the Dubai situation. With a record low UK consumer credit reading overnight and another sharp decline in Japanese car output also seen overnight, a number of markets are being confronted with classic slowing signs again and therefore the action in the US equity markets later today could be seen as an extremely critical swing factor for gold prices.
SILVER MARKET FUNDAMENTALS: Like a host of other physical commodity markets, the silver trade remains concerned about the threat of renewed slowing in the wake of the Dubai debt standstill request last week. With silver prices starting out lower this morning, in the face of a weaker US Dollar, it would seem like the silver trade needs even more assurances that the Dubai debt situation is ultimately going to be contained. We doubt that news of increased silver production from a Canadian silver mining company is adding to the downside pressure in silver prices this morning, as silver and gold both look to be intently focused on big picture macro economic conditions. It would seem like silver is tracking tightly with the gold and equity markets, with the action in the Dollar this morning somewhat seen as a secondary consideration. In the end, the silver market does appear to be under some pressure from its physical commodity market standing and that in turn might suggest that equities, instead of the Dollar, might be the most important outside market force in the Monday silver trade.
PLATINUM: Residual weakness in platinum this morning in the wake of a weaker Dollar highlights the current physical commodity market standing of platinum. We see critical consolidation support at $1,440, but we have to give the bear camp an edge early this week. It goes without saying that the platinum market was seriously over wound into the high last week and therefore a correction back down to $1,426 in the January platinum contract at some point this week, wouldn’t be that surprising.
