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OUTSIDE MARKET DEVELOPMENTS: While the Dollar is weaker this morning and oil prices are higher, the gold and silver trade doesn’t seem to be in a position to benefit as fear and anxiety are on the decline. Clearly the upward extension in the equity market is the main force behind the weakness in the precious metals markets. After months of assuming the worst for the global economy, it would seem as if a number of markets are beginning to pull forward the recovery date and that in turn seems to have discounted the prospect of US government default and other very dire outcomes. While a number of physical commodity markets are seemingly “re-inflating” because of the improved macro economic view, so far the precious metals markets don’t seem to be benefiting from inflationary prospects. With the US scheduled economic report slate today somewhat thin and the report slate for the holiday shortened week also rather thin, the gold and silver trade might not see much of an impact from the numbers this week. In fact, given the second and third tier reports scheduled for this week, it is unlikely that the number flow will be able to unseat the dominance of the action in the equity markets.
SILVER MARKET FUNDAMENTALS: In addition to very negative leadership from the gold market this morning, the silver market also seems to be under long liquidation pressure as a result of residual strength in global equity markets. However, unlike the gold market, the silver market saw holdings of silver held in a sliver ETF trust rise to a fresh record. But from the initial weakness in silver prices this morning, it would seem like classic supply side fundamentals are not being given any credence. In fact, silver exchange stocks were also supportive with another 2 million ounce single day decline. But once again the market doesn’t seem to have any interest in supportive physical supply side evidence. Even more disappointing to the bull camp in the silver market is the fact that physical commodity markets like copper and energies are consistently benefiting from improved macro economic expectations. For the time being silver is apparently being lumped into the flight to quality crowd with gold, Dollar, Yen and US Treasuries.
