Commodities » Precious Metals

Gold and silver daily commentary (March 10, 2010)

By Nell Sloane

On balance the macro economic news flow overnight was mixed, but apparently precious metals and other physical commodity markets have decided to embrace favorable Chinese trade news. According to some analysts, Chinese trade data hints at an ongoing recovery in the Chinese economy, even if that news was partially countervailed by evidence of weaker Chinese loan activity. With a fresh 2 year high in palladium prices recently and more gains in the platinum group metals markets again overnight, it would appear that gold and silver prices this morning are getting a lift from the "other" precious metals markets. Countervailing the favorable Chinese trade data overnight, is news that UK debt concerns have remained in the headlines overnight. However, a generally positive ongoing bias in many global equity markets this week, has apparently kept the macro economic outlook positive, even though the US report slate this week has been very thin. The markets today will see a US Budget balance reading, Wholesale trade inventories and US Treasury Secretary testimony on the 2011 budget and that could provide some fresh market fireworks. The trade will also see the second leg of a three leg US Treasury auction cycle.

GOLD MARKET FUNDAMENTALS:

As suggested already, the gold market seems to be watching positive leadership from the PGM's overnight and that news is apparently enhanced by press reports of decent demand for gold in the Indian gold trade. Some players are suggesting that a series of daily declines in gold recently set the market up for some bargain hunting buying today. However, a minor rise in the Dollar and ongoing Greek credit term concerns are seen as limiting forces in the Wednesday US gold trade. It would also seem like the bear camp wants to continue to play up the idea that the pace of the global recovery is weak and uneven. It did appear as if the Fed's Evans suggestions yesterday afternoon, about the Fed remaining on hold for another 6 months, helped to lift gold prices. While the market also saw news of a slight decline in physical gold production overnight from a minor producer, the gold market really hasn't paid that much attention to physical supply side stories lately. In the end, the bull camp has to be happy with the ability to rally gold prices early this morning in the face of a weaker Euro. The gold market seems to have become undervalued into the prior session's lows. In fact, even the Indian gold market was stirred into action by the setback in prices yesterday and that might mean that $1,108 level is currently being seen as a value zone. Down trend channel resistance isn't seen until $1,142.80 in the April gold contract and that might be a fair near term target. It should be noted that down trend channel resistance falls to $1,141 on Friday.

SILVER MARKET FUNDAMENTALS:

The bulls are making a big deal out of the residual strength in platinum group metals prices this week as that would seem to suggest that sentiment toward industrial and precious metals markets is strengthening. The bulls might also point to the prospect of a tightening of physical silver supply with another minor decline in daily silver exchange warehouse stocks posted overnight. However, supply hasn't exactly been a dominating fundamental force in the silver trade lately and therefore action in equities and other physical commodity markets might continue to be very important to the silver trade. Nonetheless, the silver bulls seem to be able to foster favorable forward demand expectations even in the face of a thin US report slate this week and that in turn could justify silver prices sitting within close proximity to the highest silver price level since January 21st. Like gold, seeing silver prices manage a rise this morning in the face of a higher US Dollar, would seem to suggest that the bulls are managing to win the early battle today. One can't discount the prospect of an upside breakout on the silver charts directly ahead, especially since the silver market is showing strength in the face of many outside market negatives. Apparently silver prices below $17.00 are now considered too cheap for conditions, but we are just not convinced that silver prices are destined to rise sharply above the $17.50 level in the May contract in the coming trading sessions.

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) 03/10/2010: Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. The close below the 9-day moving average is a negative short-term indicator for trend. The market tilt is slightly negative with the close under the pivot. The next downside objective is 1101.8. The next area of resistance is around 1129.0 and 1135.5, while 1st support hits today at 1112.2 and below there at 1101.8.

COMEX SILVER (MAR) 03/10/2010: Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1763.2. The next area of resistance is around 1752.5 and 1763.2, while 1st support hits today at 1711.1 and below there at 1680.3.