Commodities » Precious Metals

Gold and silver daily commentary (April 01, 2010)

By Nell Sloane

Initial claims, construction spending and the ISM manufacturing index are all possible sources of volatility today but the financial markets are keyed up for Friday's data so unless there is a major surprise, the metals may trade off or recent trends. Metals prices have held onto their gains overnight, as the markets consolidate their gains from yesterday in front of tomorrow's U.S. Employment numbers. The Dollar has been a non-factor so far today, and the lack of fresh news from China and Europe has kept prices headed in an upwards direction. China's purchasing managers index jumped more than expected to 55.1 from 52 in February and this suggests very strong 1st quarter GDP growth with some analysts suggesting 1st quarter growth near 11% due to increasing industrial production and strong China exports. South Korea reported March exports were up 35.1% from last year.

GOLD MARKET FUNDAMENTALS:

China's purchasing managers index data this morning was strong but the sub-indices showed the potential for higher inflation ahead and this may be seen as a positive factor for gold. India spot prices were higher overnight and the market continues to find some support from the advancing energy sector despite the dollar strength. The UK's Royal Mint used just 18,353 ounces of gold in the first quarter to mint coins as compared with 36,547 ounces one year ago. Traders said that the commodity sector in general could remain strong due to the expanding China, India and world economy has helped to provide a foundation of support to the gold market. June gold seems to be in a short-term uptrend and should find solid short-term support at 1109.20 with 1123.50 as close in resistance. Corrections to support should attract new buyers today.

SILVER MARKET FUNDAMENTALS:

Silver is sensitive to economic data and the direction of global equity markets so the move to the highest level since January 21st should come as no surprise overnight. Strong China manufacturing numbers overnight is a good foundation for industrial sector demand. Mexico silver production for January came in at 231,244 kilos, up 4.6%. Today's economic numbers for the US may have limited impact with the focus on Friday's employment data. July silver saw an upside breakout this week above the March high. Set- backs to support at 17.50 should be good buying opportunities with 18.09 as next objective. In addition, the market may take a run at the January gap at 18.55 eventually.

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) 04/01/2010: The market now above the 60-day moving average suggests the longer-term trend has turned up. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The intermediate trend could be turning up with the close back above the 18-day moving average. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 1127.9. The next area of resistance is around 1120.5 and 1127.9, while 1st support hits today at 1103.9 and below there at 1094.6.

COMEX SILVER (MAY) 04/01/2010: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. A positive setup occurred with the close over the 1st swing resistance. The near-term upside target is at 1785.2. The next area of resistance is around 1767.0 and 1785.2, while 1st support hits today at 1728.0 and below there at 1707.3.