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OUTSIDE MARKET DEVELOPMENTS: The Dollar is markedly higher again this morning and given the initial equity market reaction to key US earnings reports, one gets the sense that flight to quality players in gold and silver are poised to be disappointed. While the corporate earnings reports weren’t exactly stellar, it seemed as if the equity markets generally saw the news to be favorable to future economic conditions and that in turn seemed to turn up the pressure on gold and silver prices early this morning. While gold and silver prices have recently faded in the face of scheduled US data, there seems to be an expectation this morning that the US consumer sentiment readings might actually come in better than expected. However, the reaction in gold and silver prices to a much better than expected sentiment reading is difficult to predict, as the early negative bias in metals prices seems to be somewhat entrenched and the metals markets interest in playing up inflation, off good economic readings hasn’t exactly been that impressive lately. While positive action in the equity markets has also provided periodic support to gold and silver prices, the early recovery in equity prices this morning didn’t initially seem to benefit the metals.
SILVER MARKET FUNDAMENTALS: The silver market managed a big range down extension this morning and in the process the July contract reached the lowest level since January 29th. Clearly the silver market seems to be undermined by declining financial sector anxiety and perhaps because of ongoing strength in the US Dollar. With all of the actively traded metals market showing weakness today, one even gets the sense that the industrial or physical commodity market attributes are also being seen as bearish today. In other words, silver doesn’t seem to be getting any support off the hope that a real improvement in the global economy will eventually result in an up tick in physical or industrial demand. While silver exchange stocks declined overnight, the decline simply wasn’t enough to offset the prevailing liquidation pattern that started in the prior trading session. With the July silver contract failing to hold above the even number $12.00 level, it is also possible that technical pressures are adding to the bear’s resolve in the early going today.
