SMR: Gold and silver daily commentary (December 8, 2009)
With the Dollar remaining within striking distance of its recent highs and world equity markets off balance overnight, it would seem like a portion of the outside market forces are favoring the bear camp in the precious metals markets in the early Tuesday trade. Not surprisingly, hints that the Chinese might be poised to remove some stimulus served to undermine the precious metals and other physical commodity markets overnight. While the US economic report slate today is extremely thin, the trade will see the beginning of a three leg US Treasury auction cycle today and that could be a key impact on precious metals prices. The US President is also scheduled to give a "jobs" speech today, with early indications suggesting that the Administration is going to push for unused TARP funds to be channeled toward a fresh round of job programs. It also seems as if certain members of the House are pushing for the remaining TARP funds to be pushed into some form of foreclosure assistance. In conclusion, it would appear that the US deficit is not going to be reigned in any time soon and it also possible that the trade might use of the left over TARP funds as a fresh stimulus effort. On the other side of the coin, the bear camp in the metals markets seems to be embracing a sluggish/almost tired equity market condition and as long as the Dollar hangs out around the recent highs, the currency impact on the metals markets is seemingly keeping gold and silver prices off balance.
GOLD MARKET FUNDAMENTALS: Clearly comments from Bernanke yesterday provided the gold bulls with some fresh hope and that in turn would seem to suggest that the gold bulls need to see some confirmation today that US interest rates are indeed going to remain low and that might only be seen in the wake of a well attended US 3 Year note auction result at mid session. However, as mentioned in the outside market section this morning, the US equity market is starting out on a rather weak footing and the US Dollar is generally holding higher and that seems to have left the gold market under the liquidation cloud that surfaced in the wake of the US jobs report last week. Even more disappointing for the bull camp is the fact that Indian interest overnight seemed to be positive, but that action didn't seem to be able to reverse sentiment markedly. At least in the short term, the 76.00 level in the December Dollar index could be a very critical bull/bear line for February gold traders. In fact, with US equities weakening markedly just ahead of the US Tuesday action, the bull camp in gold seems to be battling a number of different themes. As in the equity market, gold traders should be aware of a potential critical junction this morning, in the face of the results of the US Note auction. Clearly the gold market was overbought and vulnerable to technical liquidation but since some of the fundamental luster has come off the market condition, we have to leave the edge with the bear camp again today. In fact, with a weaker equity market early today and the December Dollar Index flirting with the 76.00 level again, we have to suggest that the bulls are potentially facing another sharp probe down. We do think that gold prices will gain some footing into mid session, but the early morning action today would seem to be the most vulnerable. It goes without saying that $1,153 is a critical Fibonacci support level but we doubt that the February gold contract will hold above $1,147 early this morning.
SILVER MARKET FUNDAMENTALS: Like the gold market, the silver market seems to be facing a series of partially undermining outside market forces in the early going today. In addition to overt weakness in the US equity market, the December Dollar is also showing signs of regaining some key chart levels in the early going. While the silver market has seen assurances that the US is set to leave interest rates on hold, the market remains overall doubtful on that premise. It would appear that silver and copper are both watching the action in the equity market somewhat closer than the action in the Dollar and therefore it is possible that silver will be watching the mid day Treasury auction results very closely. The bull camp hopes that silver's relatively less overbought spec positioning will cushion the market against further liquidation pressure, while the bear camp this morning will probably attempt to play up the early downward thrust in the S&P. Residual weakness in gold and a slight upward bias in the Dollar leaves the bear camp in silver with the edge this morning. As in gold and the equity markets, we think that the downward bias is set to prevail into mid session, when there is the prospect of a recovery effort in the wake of the US auction results. Under current conditions, seeing a bad US auction result could compound the vulnerability of silver. Critical support in March silver is seen at $18.00 and then again down at $17,895.
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 (FEB) 12/08/2009: Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The intermediate trend has turned down with the cross over back below the 18-day moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is now at 1125.1. The next area of resistance is around 1174.1 and 1185.2, while 1st support hits today at 1144.1 and below there at 1125.1.
COMEX SILVER (MAR) 12/08/2009: Declining momentum studies in the neutral zone will tend to reinforce lower price action. The intermediate trend has turned down with the cross over back below the 18-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside target is 1754.5. The next area of resistance is around 1857.5 and 1892.5, while 1st support hits today at 1788.5 and below there at 1754.5.
