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OUTSIDE MARKET DEVELOPMENTS: From a big picture perspective, the metals markets enter the early Thursday US trade with what appears to be a slightly upbeat macro economic tilt. In fact, some initial strength in the Euro and Pound overnight seems to suggest that the currency markets are showing signs of an increase in risk appetites again. With the Chinese floating favorable economic data overnight and that data flow actually fostering inflationary expectations instead of growth views, that would seem to be a 180 degree shift from the fears of a failed recovery threat in China from several weeks ago. As least in the early going today, concerns toward the Greece and UK debt situations appear to be tamped down again and that in turn appears to have put the US Dollar under some initial pressure. In looking forward, the metals trade will technically see the first noted scheduled data flow of the week from the US, in the form of the US claims report. With some market players suggesting that February activity was restricted due to adverse weather, some players are suggesting that today’s claims figures could be the first data points that are out from under the negative influences of severe winter weather. The market will also see US Trade Balance readings and the results of a 30 Year Bond auction.

GOLD MARKET FUNDAMENTALS: The bull camp will probably try to play up news that South African gold production for the month of January forged another noted year over year decline. However, news of sagging South African gold production is not new news and even with the year over year decline in output coming in north of 18%, the gold trade just hasn’t given patently bullish supply side news that much credence lately. Some players have suggested that falling gold production will be given more credence when the trade begins to accept the prospect of sustainable global growth. Seeing talk of a possible overheating Chinese economy and a slightly weaker US Dollar would seem to leave the bull camp with a classic fundamental edge early today, but given the lingering weakness in gold prices early today, it would not seem like the early gold trade is embracing typically bullish angles. In retrospect, the gold market showed some surprising reaction to the ebb and flow of the currency markets in the prior trading session and therefore some players are of a mind, that the focus of the gold market is in a state of flux. Typically the gold market would be expected to benefit in the face of favorable US claims figures later this morning, especially if that news causes the Dollar to weaken, but the action yesterday calls that relationship into question.

SILVER MARKET FUNDAMENTALS: The silver market this morning has already managed a quasi downside extension on the charts, with the May silver contract falling to the lowest level since March 2nd. The bull camp might be slightly disappointed with a modest rise in daily silver exchange stocks overnight, but it is also possible that the trade will give that news very little attention. The bull camp continues to suggest that silver is holding up better than gold on its charts and therefore it is possible that the silver trade will see the Tuesday low of $16.875 as some form of pivot point price. However, weakness in copper and platinum prices early today, would seem to rob the silver market of the support that was seen from those markets earlier in the week. The silver bulls probably hope for something supportive from the US claims data this morning, especially if that data serves to push up the Euro and weaken the US Dollar. The May silver contract comes into the early Thursday trade, right on its 50 day moving average of $16.89.

PLATINUM: The initial bias in platinum is pointing downward today but we don’t get the sense that platinum is poised for a major washout on the charts. We do think that the market became short term overbought early in the week and a certain amount of back and fill was needed. The real test of the bear’s resolve could be seen in the event that US numbers are good this morning. Near term up trend channel support in April platinum is seen at $1,578, but the 50 day moving average isn’t seen until $1,545.

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OUTSIDE MARKET DEVELOPMENTS: With the outlook for the Greece situation seemingly improved by the latest austerity program and equity market action generally upbeat over the last 24 hours, that seems to have left physical commodities like the metals markets in favor. Apparently many markets have taken hawkish US Fed dialogue, as a sign that the US economy continues to progress toward recovery, even if scheduled data has failed to register much in the way of recovery progress. Therefore it is possible that many markets might simply discount a series of private jobs reports today. The markets will also see a US ISM Non Manufacturing release later this morning and a Fed Beige Book early this afternoon. However, with the US monthly non farm payroll reading due out on Friday morning and one of the private jobs reports this morning showing an improvement it is possible that the bull camp will lessen their concern toward the Friday numbers. As in the prior trading session, the action in the US equity markets look to be a major influence for gold and silver prices.

GOLD MARKET FUNDAMENTALS: In looking at the magnitude of the gains in gold in the prior trading session, one almost got the impression that “investment interest” was returning. Clearly a weaker Dollar and rising equities gave some credence to the prospect of recovery ahead, but in some cases it almost appeared as if hawkish US Fed dialogue was being interpreted as a development that signals a recovery in the US economy. In the end, seeing a rally in gold prices in the face of hawkish Fed dialogue and also seeing strength in the face of mostly slack US scheduled data has to embolden the bull camp and discourage the bear camp. It does appear as if favorable Indian demand patterns have provided some support to gold prices, but many traders think that gold strength is generally coming from outside or bigger picture elements. At least in the early action today, it would appear that calm in the Greek situation will give the bull’s some added confidence, while the bear camp will attempt to play up the prospect of weak jobs news from the US economy. For most of the last two months, the gold market has acted like a physical commodity market and therefore the tight correlation with equities is likely to continue to impact gold prices.

SILVER MARKET FUNDAMENTALS: The Silver market has managed another new high for the move today and in the process it has managed to rise within close proximity to the 100 day moving average of $17.33. Clearly silver appears to be up beat toward the prospect of global growth, in the wake of an improvement in the Greek situation. It almost seems as if silver and other physical commodity markets have taken overtly hawkish dialogue from the US Fed, as a sign that the US economy “must” be improving. In other words, if the Fed is feeling the need to tighten, they must be seeing signs of progression in the US economy. In the short term, weakness in the Dollar and a lack of concern toward the economy looks to favor the silver bulls, while the bear camp will look to potential weakness in upcoming US jobs figures and further debt problems to stem the current rise in silver prices. The bear camp might also be hopeful that US monthly payroll readings on Friday morning will serve their case better than the economic psychology seen in the first three days of this week. In the end, classic supply and demand news in silver is minimal and seemingly unable to unseat the focus on outside market forces.

PLATINUM: Another new high for the move leaves the bull camp with clear control over platinum prices. A weaker Dollar and a pattern of positive spin on the economic outlook looks to add to the upward momentum in platinum. With the added support from a possible platinum strike in Australia, the platinum market is getting both internal and external fundamental support. Next upside targeting in April platinum is seen at $1,584 and again up at $1,594. While we have a gut concern that economic views are overly optimistic, it probably won’t pay to stand in the way of this market in the coming trading session.

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May copper is positively positioned in the early going today. With a weaker Dollar and generally up bear macro economic views, the bull camp has more ammunition than the bear camp. Limiting the upside in copper are beliefs that Chilean production won’t be seriously derailed because of the quake. While we can’t deny some upside action today, we are uncomfortable chasing copper prices higher off the current macro economic view. However, May copper will probably see some noted support off the even number $3.40 level, but we wouldn’t be surprised if the private jobs readings serves to temper the bullish attitude a bit in physical commodity markets later this week. On the other hand, some traders are taking notice of a small number of daily LME copper stock declines and suggesting that is the beginning of a pattern and that is another example of the market spinning marginal developments into a positive event.

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OUTSIDE MARKET DEVELOPMENTS: While the US Dollar remains within striking distance of its recent highs, the Dollar action overnight does not appear to be the primary reason behind the slide in gold and silver prices. Apparently softer than expected US Consumer Confidence readings and the sharp downside push in global equities on Tuesday undermined global recovery views and that in turn has prompted selling in a host of physical commodity markets like gold and silver. It would also not seem like debt concerns in the Euro zone are behind the overnight weakness in the precious metals markets. With a US new home sales report due out later this morning and the outlook for the recovery seemingly downgraded recently the importance of regularly scheduled US data flows looks to have expanded. Some bulls might hope for some support off the US Fed Chairman testimony at mid morning, as the Chairman is expected to reiterate the need to leave US interest rates at low levels for an extended period of time. The markets will also see a second leg of US Treasury auctions around mid session with $42 billion in 5 Year notes being offered for sale.

GOLD MARKET FUNDAMENTALS: There appears to be a general macro economic let down being embraced in gold and other economically sensitive commodity markets. While the Consumer Confidence readings from the US aren’t typically seen as a top tier economic report, the market has apparently taken those readings to heart and it could take something very positive from the new home sales report this morning just to temper the fear of a long slow recovery process. After the early weakness in gold prices today, one could suggest that disappointment over potential Chinese interest for IMF gold supply added into the negative price tilt overnight, but the Chinese have already signaled that current gold price levels were unattractive to them. However, there are press reports overnight suggesting that India might be a buyer for the IMF gold supply and given the size of the IMF gold sale, it would not seem like the physical sale issues are a primary bear force for the gold trade. It would almost seem as if the gold trade is fearful of the US Fed Chairman testimony later today and therefore traders might expect to see some mid morning volatility in gold prices around that testimony. With gold and equities seemingly tightening their relationship recently, gold traders will probably continue to take a large measure of guidance from the US stock market.

SILVER MARKET FUNDAMENTALS: The silver market remains under pressure in the early going today with the silver trade suggesting that broad based physical commodity market weakness was behind the slide in prices yesterday. As in the gold market, silver was disappointed with slack US numbers and also with the sharp declines in US equities. With noted weakness in industrial commodities like copper, the silver market seems to be encountering financial and industrial based selling pressure. Given the drift back a toward classic physical commodity market fundamental focus in silver, that could make the new home sales report and the action in the US equity markets this morning even more critical to the silver trade. The bear camp might even play up a minor trend of builds in daily silver exchange stocks as a negative but in the short term, the concern of slackening demand seems to be more important than minor supply side issues.

PLATINUM: There is no respect for the recovery and that leaves the door open for more liquidation selling in the platinum market. With an early failure back below the $1,500 level this morning, it is clear that some classic technical pressure is set to combine with a poor fundamental picture. However, we would not rule out a respect for support down at $1,489 in the face of Bernanke testimony this morning but only if the new home sales figures manage to stay in positive territory.

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With a slide below a series of key technical points on the charts overnight and a downshift in the global macro economic recovery view recently, we have to leave the bear camp in control of copper prices. With a decline in Chinese January refined copper imports seen overnight, the copper market would seem to be getting both internal and external bearish fundamental news. With a slide below the $3.20 level seen in March copper prices early this morning, we see little in the way of support on the charts until the $3.1490 level. In fact, unless the copper market can come away from the new home sales report this morning and the Bernanke testimony with a layer of fresh optimism, we can’t rule out a continued slide down to consolidation support down at the $3.10 level. Aggressive traders can be short, but one should probably tolerate any trade in March copper back above the $3.20 level.

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OUTSIDE MARKET DEVELOPMENTS: With the US Dollar only slightly weaker this morning and gold and silver prices showing a very firm bid, it would not seem like the action in the currency markets was the primary catalyst behind the bullish action in the metals markets. With sharply higher equity market trade it is possible that an improvement in macro economic sentiment was providing the bull camp with a lift this morning. Some traders are suggesting that stronger than expected earnings from the UK bank Barclays was the primary force that served to improve overall macro economic sentiment today, while others suggested that the presence of a 30 day grace period for Greece was providing a temporary all clear signal. However, the markets could have been a little disappointed by the weak German ZEW readings overnight, but that information was seemingly overshadowed by the Barclays news and by the expectation of somewhat positive US scheduled data flows later this morning. With the US scheduled to release an Empire State Manufacturing report and a NAHB Housing Index reading and the trade calling for minimally positive readings in both those reports, it is possible that the US Dollar will remain off balance and physical commodities like gold and silver will be supported by today’s data.

GOLD MARKET FUNDAMENTALS: With a definitive range up extension this morning on the charts, the April gold contract has managed to reach the highest level since February 3rd. In addition to an improved macro economic condition this morning, the gold trade seems to be somewhat relieved that the situation in Greece might be put on hold for a full month. The gold market might also have garnered some support from a string of favorable US and UK corporate earnings reports this morning, as that news seems to have reversed the patently bearish economic sentiment that seemed to be settling into the markets last Friday. Surprisingly Indian gold market action overnight was mostly unimpressive and that suggests that improvement in developed country economic sentiment is indeed a major component of the bull case this morning. However, with April gold managing to climb back above the 50 day moving average early this morning, that action has fostered some talk that the gold market might be throwing off the downward bias that has periodically dominated the trade since the early December 2009 top. At least in the early going today, it would appear that favorable equity market action means more to the gold bulls, than minor US Dollar weakness.

SILVER MARKET FUNDAMENTALS: As in the gold market, the silver market bulls appear to be cheered by the idea that Greece has been given a 30 day grace period. It is also likely that favorable UK bank earnings news from Barclays is adding into the positive macro economic tilt this morning in silver. In short, silver appears to be deriving most of its upward action off an improvement in macro economic sentiment and not necessarily from minor declines in the US Dollar. Unlike the gold market, the silver market hasn’t been able to regain its 50 day moving average, which surprisingly sits all the way up at $17.19 in the May silver contract. For the time being, silver appears to be acting like a physical commodity market, that is seeing a modest improvement in overall psychology but it is also possible that distinctly favorable US equity market action will be the key to the silver bull’s near term control over prices. Unfortunately for the bull camp, the silver market was once again presented with news of a rather sharp gain in physical silver production from Pan American silver over the weekend but apparently the silver trade is discounting bearish supply side news in favor of an improvement in overall physical commodity demand expectations.

PLATINUM: Like the rest of the physical commodities, platinum is apparently poised to extend on the upside. With a weaker Dollar and higher equities and perhaps even some favorable US scheduled data flow, we have to think that April platinum is capable of a near term rise back above the $1,550 level. The Commitments of Traders Futures and Options report for platinum showed that as of February 9th, the Non-Commercial and Non-reportable combined traders held a net long position of 22,532 contracts, which represents a decrease of only 100 contracts in their prior net long position. However, with April platinum to this morning’s highs, already sitting as much as $38 an ounce above the level where the COT report was measured, the net spec positioning in platinum is clearly understated.

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An improved global macro economic outlook and a slightly weaker US Dollar appear to have given the copper bulls the initial edge today. With the Chinese on an extended holiday and the copper trade seeing a very minor labor orientated supply side threat overnight, it is clear that the bull camp has more ammunition than the bear camp. However, the copper market did see some negative supply side news late last week and with the weakness see at times in the US equity markets last Friday, the macro economic optimism today seems somewhat surreal. However, seeing the Greece debt situation put under control for 30 days seems to have given the bull camp an added measure of confidence. In fact, seeing some very impressive earnings news from Barclays overnight has clearly added to the macro economic bullishness and if the scheduled US numbers can add to the bullish look on the economy, there might be little to prevent the March copper market from rising back above the even number $3.20 level. The Commitments of Traders Futures and Options report as of February 9th showed the Non-Commercial and Non-reportable combined position to be net long 11,897 contracts, which was a reduction of the net long by 6,594 contracts from the previous report. Therefore the copper market shouldn’t be held back by an overbought technical condition today.

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Optimism in the copper market had been running exceptionally high since the start of the year on expectations for industrial metal demand to recover in tandem with an improvement in the global economy. A good portion of the gains in copper leading up to the January high was based on expectations that China’s voracious copper demand would remain robust this year, while rising investor risk appetite tied to the weak Dollar also provided significant price support. But there have been a few fundamental, economic and political shifts over the last month that have changed the mood. We see a strong enough change in sentiment to suggest more of last year’s premium will be pulled out of the market and leave May futures vulnerable to an eventual test of the $2.85 price level.

Perhaps the biggest factor impacting the trend change in copper has been China’s move to tighten bank liquidity, that has escalated concerns that copper demand will soften as China’s economy cools. As there seems to be growing speculation that China will have to tighten interest rates even more aggressively during the year, the market is beginning to price in a lower demand outlook from Asia, and that could end up being a longer-term weight on the copper market. With most of the economic news in January coming in soft, it still doesn’t appear that the pace of recovery in the US economy, at least in the key copper industries of construction, transportation and machinery, will be strong enough this year to support copper prices at these inflated levels.

With the copper market in the midst of scaling back demand expectations, we suspect that it will feel a strong impact from high supplies. Copper warehouse stocks at the LME have seen a steady rise over the last several months, recently reaching a one-year high. This also raises doubts over actual copper demand. The Dollar is currently in a fairly convincing uptrend, being supported by a variety of factors, and this could be another bearish influence for copper over the near term. We also think traders shouldn’t underestimate the bearish impact from the harsh political regulatory climate. The government’s move toward imposing tighter position limits and the Obama Administration’s push to restrict proprietary trading by banks could certainly change the investment landscape and would likely have a negative impact on copper prices as well.

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OUTSIDE MARKET DEVELOPMENTS: While a number of international equity markets managed to bounce overnight, one doesn’t get the impression that global economic sentiment has actually improved. In fact, the Dollar seems to have remained in favor, in the wake of ongoing fears toward the Greece financial condition. However, the markets did see a rather robust UK house price gain overnight, but that news might have been offset by surprising comments from Trichet, who suggested that the risk of a global depression was underestimated. However, economic sentiment might improve temporarily this morning in the wake of the US 4th quarter GDP reading. In fact, Obama early in the week hinted at an improvement in the US GDP report, but the trade already seems to have baked in a strong US GDP report for this morning.

GOLD MARKET FUNDAMENTALS: While the gold market seems to remain focused on demand prospects, the track of supply side news this week seems to have generally favored the bear camp. Fortunately for the bull camp news of a rise in Chinese gold production this week, was offset by news of a jump in Indian gold imports. However, the gold trade has to be concerned about residual strength in the US Dollar, as the Dollar managed yet another new high for the move early this morning and in the process the Greenback reached the highest level since September 1st. While the trade is generally anticipating a strong US GDP reading this morning, one would have to think that the market has already factored in a large portion of that type of result. The bear camp will point out that April gold remains below the 100 day moving average of $1,088.70 into the opening today, while the bull camp might try to play up the strong leap in UK house prices and a slightly positive early track in the US equity markets. For the gold market to benefit from higher equity prices today might require equities to maintain higher prices all the way into the close today, as rallies in stocks this week have been fleeting events.

SILVER MARKET FUNDAMENTALS: While May silver has managed to recover from the low forged yesterday, the bull camp would seem to have very few themes at its disposal. Clearly silver saw some pressure this week off a growing disappointment in the pace of the US economy, and those views also seem to have been enhanced by a very confusing political environment and by noted declines in US equity prices. Like gold, the silver market also seemed to be partially undermined by the resurgence of concerns toward the Greece situation. Furthermore, silver also seems to have be weighed down by noted weakness this week, in a host of physical commodity markets. In conclusion, the silver bulls appear to need something very positive from the US GDP report this morning, but the question is whether or not macro economic optimism will be sustained after the GDP reading is absorbed. It is also possible that a strong US GDP reading could lift the Dollar further this morning and that could serve to limit the benefit of economic optimism in most physical commodity markets.

PLATINUM: With a partially oversold technical condition and hopes of some positive news from the US economic report front, we have to give the initial edge to the bull camp. Therefore close-in support is seen at $1,500 today and we can’t rule out a rise back to $1,526. However, with a slack economic outlook still generally in place, traders should not shift back into a full bull mood.

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OUTSIDE MARKET DEVELOPMENTS: With the Dollar managing to reach the highest level since early September overnight, it would seem like currency related selling pressure will remain in place for gold and silver prices. The bull camp in the metals complex had to be partially disappointed with the inability to benefit from news of ongoing rather stellar economic strength in the Chinese economy overnight. It also seems as if the metals trade generally remains unconcerned about inflationary prospects. In looking forward, the US will bring forth claims data, Philly Fed manufacturing figures and a Leading indicators report today but those numbers aren’t expected to provide much of a surprise from the economic front. With a host of physical commodities showing a liquidation pattern in the face of the ongoing Dollar gains and that action being accompanied by weakness in global equity prices, the bear camp in the precious metals complex would seem to have the benefit of the doubt.

GOLD MARKET FUNDAMENTALS: While the gold market saw evidence of a rise in gold production from a Russian gold miner, that news would not appear to be the reason for the early weakness in gold today. Clearly persistent gains in the Dollar has tripped up the gold market, with that mentality probably preventing the gold market from garnering support from news of a small Russian gold reserve buy. With the focus so intently on the direction of the US Dollar, the gold market also doesn’t look to benefit from talk that the availability of scrap gold supply in India might be set to dwindle. In other words, the focus on currency issues probably means that classic supply and demand side elements are going to be discounted. With the trade either expecting the Chinese to over tighten, or that the Chinese economy to falter it would seem like the trade is simply ignoring the potential for continued ongoing growth in China and that would seem to highlight the existence of a bearish spin in the gold market. With the US Treasury market showing consistent gains this week, it is also possible that markets like gold are even sensing a decline in flight to quality concerns off the possibility that US government spending efforts might somehow be restrained by a change in political winds.

SILVER MARKET FUNDAMENTALS: Technically, the silver market appears to have violated a series of key points with the overnight slide. In addition to falling below the 50 day moving average again the silver market has also failed to check up at classic retracement levels. Like the gold market, the silver market saw some potentially undermining silver production news from a Russian silver miner overnight but the real culprit behind the slide in silver prices looks to be the rising Dollar. However, the silver bulls have to be really disappointed with their inability to benefit from stellar Chinese economic readings that were released overnight and that is apparently the result of trade ideas that the Chinese government is ready and able to stop inflation before its takes a strong foothold. It is also likely that silver prices are being pulled downward by a general, but somewhat broad based physical commodity market liquidation pattern.

PLATINUM: We have to think that platinum is poised for more corrective action ahead, as the trade was overbought and the outside market forces are clearly favoring the bear camp. The failure to hold the $1,596.30 level, could add to the downward tilt in prices today, especially if the broad based physical commodity liquidation wave continues.