OUTSIDE MARKET DEVELOPMENTS: With the Dollar reaching the highest level since March 18th in the early morning action today, equity prices sharply lower and a host of physical commodity markets under noted pressure, one gets the sense that the outside market forces are weighing heavily on precious metals prices into the US opening today. One almost gets the sense that the US auto sector uncertainty has rekindled concerns of too much slowing. In fact, it would almost seem like sentiment has shifted away from inflation and back in the general direction of deflation. Surprisingly the gold market didn’t seem to give much credence to an attempt to rally Indian gold prices overnight. Even more surprising is that gold was also unmoved by the sharp gains in the Yen, which in the recent past has been a sign of increased flight to quality anxiety. Perhaps the gold market is seeing some weakness off fears of the upcoming G20 meeting, which some traders think might result in some renewed talk of gold sales from that entity. With the US scheduled to release a regional Fed manufacturing reading this morning and the concern for the US auto sector already dominating the headlines overnight, it is likely that the metals trade is simply fearful of a negative reaction to the US data flow this morning. In short, the outside market bias seems to be favoring the bear camp in the early going today.
MARKET FUNDAMENTALS: The silver market is clearly being undermined this morning as a result of weaker gold market and a stronger US Dollar. Some players were concerned that May silver fell below $13.00 in the early going today, perhaps because both precious and industrial metals prices were under clear pressure this morning. In conclusion, it would not appear that the silver market is set to get much support from the precious metals market action or even from industrial metals market action this morning. With the US Dollar also showing signs of overt strength, even the currency market impact on silver prices looks to favor the bear camp into the start of the new week. In the near term, the silver market probably looks to discount physical supply and demand news again and instead look to the direction of gold prices and perhaps even to the direction of equity prices for a large portion of its near term price direction.