Commodities » Precious Metals

Gold and silver daily commentary (March 19, 2010)

By Nell Sloane

The strength of the Dollar against European currencies, particularly the British Pound, has put precious metals prices under moderate pressure into the US Friday opening. Comments made overnight by an EU commissioner saying that the Greece situation has not been resolved yet, would seem to be behind the action in the currency markets. However, some metals traders have suggested recently that EU debt concerns were actually a source of buying support but that angle doesn't seem to be in vogue this morning. News that the Greeks may sidestep the EU and appeal for help directly to the IMF could be seen as a back stop against a full return to runaway EU debt concerns. With no U.S. economic releases this morning, the markets might be left with the low inflation/muted growth view that was established earlier this week. However there is a triple witching expiration facing the US equity markets today and the expectation of a weekend vote on US health care reform and those two factors alone could serve to increase volatility in a number of commodity markets.

GOLD MARKET FUNDAMENTALS:

April gold comes into the opening today under modest pressure, but still above this week's lows. While there were reports of record gold production from a smaller producer overnight, the weakness in gold prices this morning appears to be the result of outside market influences, instead of classic supply and demand side developments. Therefore, the gold market probably won't see much in the way of fresh selling interest from overnight news of higher Indian gold production in the ten months following April of 2009. The tech traders are noting a 21 day moving average at $1,118.80 today, as that level is just below the early Friday morning trade action. With the lack of scheduled US data flow today, the gold trade is likely to take a large measure of direction from either the currency markets or from US equities. We have a hard time shaping lingering EU debt concerns into a positive for gold. In fact, we also have a hard time shaping this week's economic developments into a positive for gold prices. Lastly we have an extremely hard time shaping the potential passage of US Health Care reform into a positive for gold, unless you think that Congress has finally spent the US into a bottomless pit. However, we also can't justify a rise in the Dollar this morning, in the wake of the news flow and therefore maybe the gold market will see only limited selling today and into the Monday trade.

SILVER MARKET FUNDAMENTALS:

May silver is showing some initial weakness in the early morning Friday trade. In fact, May silver has already managed to take out the lows of the last two trading days and at times this morning the silver market has also tracked below the 100 day moving average of $17.27. While silver exchange stocks have seen a series of modest builds this week, it would not seem like silver prices are being pressured this morning because of bearish physical supply news. Similarly, most traders doubt that news of lower US silver production for November 2009, versus October of 2009, from the US Geological Survey is being seen as a noted negative for silver prices today. While copper prices are higher this morning, weakness in energy prices and other physical commodity prices would seem to leave the outside market influence on silver mixed to slightly negative. In the end, a lack of scheduled US economic data today could mean that silver prices are destined to take a lot of direction from equities and from the currency markets. We have a bearish view toward silver today, as the silver market is a physical commodity market that is facing a slack economic environment and is also facing a generally strong Dollar. We also think that physical commodity markets will be faced with ideas of rising taxes and potential economic uncertainty in the event that the US health care reform push results in companies pushing millions of employees toward government insurance. Near term downside targeting in the May silver contract is now seen at $16.96.

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) 03/19/2010: The daily stochastics gave a bullish indicator with a crossover up. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1136.3. The next area of resistance is around 1131.8 and 1136.3, while 1st support hits today at 1120.6 and below there at 1113.8.

COMEX SILVER (MAY) 03/19/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside objective is at 1766.8. The next area of resistance is around 1754.2 and 1766.8, while 1st support hits today at 1730.8 and below there at 1719.9.