Commodities » Precious Metals

Gold and silver daily commentary (March 08, 2010)

By Nell Sloane

The currency impact on metals prices this morning was mostly mixed, but apparently some slightly positive initial global equity market action was mostly lost on gold and silver prices in the very early Monday action. The bull camp in gold and silver should be a little discouraged by the lack of initial favor today, especially since European dialogue toward Greece was upbeat overnight and there were also a number of physical commodity markets showing strength in the early Monday morning trade. In fact, palladium prices in some markets managed a noted upside breakout on the charts and that would seem to give the precious metals markets a mostly positive lead in from international market action. Unfortunately Indian gold price action was a touch weaker overnight even though the Press was picking up on hedge related buying in that market. In looking forward to the US economic report slate today, the data flow is somewhat thin, with only a third or fourth tier private employment trend survey to be released. In fact, with the markets fresh off a major US monthly jobs report from last Friday, the private jobs survey release this morning might be given little attention.

GOLD MARKET FUNDAMENTALS:

While the bull camp would like to garner some outside market support from the favorable copper, platinum and palladium price action overnight, there does seem to be a distinction this morning between precious and quasi industrial metals markets in the early Monday trade. Some gold traders Are upbeat off the favorable Greece comments from the French President overnight, while others remain skeptical that the Greek debt situation can be fully placed in the rear view mirror. However, the Euro is showing some strength this morning and the overall macro economic outlook seems to have remained positive from last Friday's morning's US news and that could help to underpin the bull case today, especially in the face of a low US data environment. On the other hand, the bear camp can probably point to an ongoing loss of non farm payroll jobs in the most recent jobs report, as a sign that the US economy still remains mired in some form of slowdown. The Commitments of Traders Futures and Options report as of March 2nd for Gold showed Non-Commercial traders were net long 222,905 contracts, an increase of 11,084 contracts. The Non-reportable traders were net long 45,973 contracts, an increase of 6,381 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 268,878 contracts. This represents an increase of 17,465 contracts in the net long position held by these traders. The bears seem to have a slight profit taking selling edge in the early going today. However, we don't see much in the way of downside action ahead, unless the equity markets fall hard and something unexpected and disconcerting from the economy surfaces. In short, a pattern of lower highs might prevail with a minimal downside target in the April gold seen at $1,113.50.

SILVER MARKET FUNDAMENTALS:

Unfortunately the bull camp in silver market isn't paying that much attention to classic supply side developments lately, as the trade continues to see evidence of very strong demand for silver coins from the US Mint. Apparently January sales for silver coins at the Mint reached over 3.5 million ounces, which was apparently a fresh monthly record for silver coins sales from the Mint. One could also noted that daily silver exchange stocks declined by 252,000 ounces at the end of last week, but that kind of news is probably considered insignificant. Silver appears to be partially happy with the Greece situation this morning but perhaps the trade is a little disappointed with the choppy two sided action in global equity markets. For the time being, silver might continue to behave like a classic physical commodity market that is hopeful of a recovery, even if that recovery might be considered somewhat anemic. The Commitments of Traders Futures and Options report as of March 2nd for Silver showed Non-Commercial traders were net long 30,890 contracts, an increase of 3,994 contracts. The Non-reportable traders were net long 10,797 contracts, a decrease of -2,416 contracts. Non- Commercial and Non-reportable combined traders held a net long position of 41,687 contracts. This represents an increase of 1,578 contracts in the net long position held by these traders. At least in the early going today, the May silver looks to have resistance at the $17.50 level on the charts, but the bull camp could easily push prices to the highest levels since January 21st, but that might require a positive upside extension in the US equity markets.

METALS TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.

COMEX GOLD (APR) 03/08/2010: Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market tilt is slightly negative with the close under the pivot. The near-term upside objective is at 1146.8. The next area of resistance is around 1138.7 and 1146.8, while 1st support hits today at 1125.1 and below there at 1119.5.

COMEX SILVER (MAR) 03/08/2010: Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. A positive setup occurred with the close over the 1st swing resistance. The next upside target is 1766.6. The next area of resistance is around 1751.2 and 1766.6, while 1st support hits today at 1716.8 and below there at 1697.7.