The Hightower Report

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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia and Europe are generally weaker this morning, and U.S. stock indices have posted moderate losses during the early Tuesday trade. The Dollar is generally weaker against the major currencies during overnight trading, although posting a moderate gain against the Pound. The Japanese Prime Minister will face a leadership challenge in an upcoming political party election. France has sent a proposal for stronger EU regulation of commodity markets to the European Commission. Japanese Industrial Production during July was up 0.3%, higher than forecasts. Japanese Retail Sales were up 3.9% year-on-year, higher than expectations. Euro zone Unemployment during July was 10.0%, unchanged from last month and in-line with forecasts. German Unemployment during August was 7.6%, unchanged from last month. UK individual borrowings during July were 300 million Pounds, much weaker than expectations. A private survey of UK Consumer Confidence during August rose to -18, slightly higher than forecasts. US economic numbers released this morning include a private survey index of Home Prices at 8:00, a private survey of Purchasing Managers in the Chicago area at 8:45, and a private survey of Consumer Confidence at 9:00 AM.

GOLD MARKET FUNDAMENTALS: The gold trade continues to waffle between support off the uncertainty in the global economy, and concerns of spiraling deflation. Some gold traders think that gold is set to be undermined in the face of weak economic data points ahead, but the real test will be the post-report trade action in gold. European gold traders seemed to be partially undermined by the initial weakness in equity prices today, and that would seem to suggest that deflation concerns are present again in the marketplace. A recent decline in volume is thought by some traders to be a sign that the month and a half rally in gold prices is starting to discourage some buyers, but the bulls could spin that argument around and suggest that volume seems to be declining on down days in prices. At least in the early action today, the trade seems to be poised to take a large amount of direction from the FOMC meeting minutes to be released later in the trading session. Comex Gold Stocks were 10.817 million ounces, down 63,029 ounces. Gold stocks have declined 15 of the last 20 days. Comex Gold stocks are at the lowest in the past 10 readings.

SILVER MARKET FUNDAMENTALS: The bear camp is probably a little emboldened by the weak action on the charts in the early Tuesday US silver trade, as silver prices reached the lowest level since August 25th. News of a fresh silver find from a Canadian silver miner is probably not a major impact on silver prices today, as silver recently hasn’t paid that much attention to physical supply side stories. After showing some leadership within the precious metals complex last week, some traders suggest that silver prices might have become short term technically overbought off last week’s action, and therefore the bull camp in silver would seem to need help from the scheduled data flows today. Like gold, silver seems to be getting less lift from economic uncertainty, and that suggests physical commodity market fundamentals might be regaining importance in the marketplace. Comex Silver Stocks were 110.758 million ounces, down 386,235 ounces. Stocks have declined 11 of the last 20 days.

PLATINUM: The platinum market appears to be tracking physical commodity market fundamentals during a period of slowing growth expectations. With the October platinum market reaching a partially overbought level yesterday and temporarily forging the highest price level since August 19th, it isn’t surprising to see prices this morning in the midst of a noted range down extension. Weaker equities and a negative tone toward the economy would seem to give the platinum bears the edge, but the bull camp might suggest that any favorable surprise from the data front this morning could catch the platinum market in an overly bearish fundamental posture.

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OUTSIDE MARKET DEVELOPMENTS: With equity markets in Asia and Europe generally weaker, U.S. stock indices are trading lower during the early Friday trade. The Dollar is stronger against most of the major currencies during overnight trading. A member of the European Central Bank council stated that assistance to Euro zone banks should continue through the end of 2010. The Finance Minister of Japan stated that they are communicating with other G7 nations about the strength of the Yen. The Chinese government will officially encourage more foreign institutions to issue Yuan-denominated securities. A private survey of Japanese retail investor sentiment fell to an 8-month low, mainly due to the strength of the Yen. There are no major US economic numbers to be released this morning.

GOLD MARKET FUNDAMENTALS: With the slowing mentality in place this morning, the gold market still seems to be underpinned by the fear of further slowing but there doesn’t appear to be much in the way of fresh economic news from the overnight headlines. Some traders have suggested that gold is supported by statements from the ECB, that they would leave easing in place through the 1st quarter of 2011. With some rather significant gains already posted this week, the gold market might be showing some technical balancing action this morning with the initial setback in prices. With a mostly empty US economic report slate today, the gold market might have to take its cues on the economy from the action in the US equity markets. It is also possible that part of the early profit taking in gold this morning is the result of a recovery in the US Dollar against the Euro and a host of other currencies. At least in the near term, the gold market looks to embrace the fear of slowing and the flight to quality angle as the primary market focus. Comex Gold Stocks were unchanged at 10.964 million ounces. Stocks have declined 11 of the last 20 days.

SILVER MARKET FUNDAMENTALS: The failure to see September silver contract forge new highs for the move this week, in the wake of the range up action in the gold market, has apparently disappointed some traders as silver this morning is flirting with new lows for the week in the early Friday trade action. Apparently silver is feeling its physical commodity market roots this week, in the face of the recent economic letdown. With the US Dollar also showing signs of strength this morning, it is possible that silver and other physical commodity markets are feeling some currency related pressure as well. Comex Silver Stocks were 110.992 million ounces down 37,482 ounces. Stocks have declined 12 of the last 20 days.

PLATINUM: October platinum comes into the trading session in a technical chart failure and at the lowest price level since the August 12th spike low. Like silver, the platinum market is concerned about unchecked economic slowing. Therefore, we see little reason for October platinum to avoid a slide back to even numbers at $1,500. In fact, in the face of a downside extension in equities, October platinum might fall all the way down to consolidation support at $1,489.

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OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia and Europe are generally higher this morning, US equity indices are reflecting small losses during the initial Thursday morning trading action. The Dollar is moderately higher against most of the major currencies going into the US opening today, with minor losses to the Pound and Canadian. The US Treasury avoided naming China as a currency manipulator in their semi-annual report on exchange rate policies. The Bank of Korea raised benchmark interest rates for the first time since 2008. The President of the European Central Bank said that he did not feel that budget cuts would put the EU back into a recession. The German Consumer Price Index for June was up 0.9%, in line with forecasts. French Industrial Production for May was up 1.9%, above forecasts. The UK Producer Price Index for June was 5.1% year-on-year, lower than expectations. The UK Foreign Trade Deficit for May was 8.1 billion Pounds, higher than forecast. The only major US economic number scheduled for release today will be Wholesale Trade for May, at 9:00 AM.

GOLD MARKET FUNDAMENTALS: In general, the gold trade continues to fear a further tamping down of flight to quality sentiment, as the flow of patently discouraging news from the Euro zone this week has been accentuated by some positive US economic news flow from the US. With US ongoing claims technically forging a downside breakout on the charts yesterday, some traders jumped to the conclusion that the US economy was holding together better than recent expectations. With a pattern of gains in US equities also seen this week, an improved macro economic view was given added credence and that in turn tamped down uncertainty. The gold market apparently doesn’t know how to handle news that the White House seems to have given the Chinese a temporary pass on being tagged as a currency manipulator, perhaps because certain members of Congress are still committed to taking action against China. It is also possible that a series of interest rate hikes from Asia overnight were seen as a negative by some gold traders. While the US report schedule today only contains a Trade Balance release, that report should temporarily distract the gold market away from its recently acquired infatuation with the action in the US equity markets. Comex Gold Stocks were 10.959 million ounces up 63,802 ounces. Comex Gold Stocks have reached another new record high level.

SILVER MARKET FUNDAMENTALS: The silver bulls have to be discouraged this week as gains in a host of physical commodities this week were not accompanied by strength in silver prices. Clearly the silver market favored the flight-to-quality focus this week instead of its classic physical commodity market fundamentals. With another Canadian silver miner overnight expected to float record/increased output, the classic supply side fundamentals in the silver market could be seen as a detriment to prices, but demand not supply seems to be the dominating force in determining silver prices lately. The bull camp might suggest that a consolidation around this week’s lows might offer up support around the $17.61 area today, but the bear camp could point to the inability to sustain prices above the even number $18.00 level as a sign of ongoing weakness. Some traders think that upbeat US Fed statements overnight and news of rate hikes from Asia overnight are also serving to limit silver prices. Comex Silver Stocks were 114.502 million ounces up 602,288 ounces. Stocks have declined 11 of the last 20 days.

PLATINUM: The platinum market continues to diverge with gold and silver, and in the process has cast its lot with the recovery crowd. In other words, platinum is behaving like a classic physical commodity in the face of gradually improving macro economic sentiment. However, gains off this week’s lows have been rather muted and that leaves the bulls with only minimal confidence. With the middle of the last month’s consolidation zone seen up at $1,550, that is a logical target/resistance point for the October platinum contract. However, we aren’t sure that the trade is going to see as much favorable economic news today as it was presented with yesterday. Therefore, we are a skeptical bull for the trade today.

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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia and Europe are mostly weaker this morning, which has led to US stock indices posting sizable losses during the initial Tuesday morning trade action. The Dollar is much stronger against most of the major currencies, but has lost ground versus the Yen going into the US opening. There is concern that European banks may have trouble paying bank 442 billion Euros in emergency 1-year loans due this week. A large revision in the April Chinese Leading Indicators, from +1.7% to only +0.3%, might have triggered a huge sell off in Chinese equity markets today, but other sources suggested an upcoming China AG bank IPO might have caused selling to raise cash for the new IPO. Tropical Storm Alex is expected to be upgraded to a hurricane later today, and it is tracking northwest into the Gulf of Mexico. Japanese Unemployment for May was 5.2%, higher than expected. Japanese Industrial Production for May was also down 0.1%, lower than forecast. The major US economic numbers scheduled for release today is a private survey of Consumer Confidence for June, to be released at 9:00 AM. The market will also see a private US Home Price survey.

GOLD MARKET FUNDAMENTALS: A large portion of the sharp drop in the London gold fix overnight is a catch up to the slide seen in the US Monday afternoon action. After the gold market generally ignored news of a decline in Peru gold production in the prior trading session, it is possible that the gold market will also ignore news this morning from Gold Fields of a rise in 4th quarter gold production. Recently the gold market has discounted or downplayed physical supply side stories in favor of the ebb and flow of investment/physical demand news. It is also possible that ongoing concerns for slumping Indian gold imports is serving to temper sentiment toward gold. On the other hand, flight to quality sentiment is apparently present in the Treasury and currency markets this morning and that might be providing some indirect support to gold prices regardless of the sloppy early track in prices this morning. Comex Gold Stocks were 10.861 million ounces down 1,397 ounces. Stocks have now declined in 12 of the last 20 days.

SILVER MARKET FUNDAMENTALS: The September silver contract this morning took out the prior two sessions lows in the early action today and that would seem to leave the bear camp emboldened. Apparently both silver and gold are missing out on the flight to quality view that is serving to lift US Treasuries this morning. If the Treasury market is rising off the fear of global or US slowing, that could be turning up the liquidation pressure on silver from its physical commodity market standing. While the silver market might be seeing some weak selling pressure from fears of slackening Indian silver imports, the silver market isn’t usually that interested in Indian silver import data. In the end, weakness in a host of physical commodity markets this morning could be spilling over into the silver market. Comex Silver Stocks were 114.929 million ounces up 547,748 ounces.

PLATINUM: The Platinum market is in the midst of a big range down extension, but apparently the October contract found some form of support at the even number $1,550 level. With fresh buying interest seen in the most recent positioning reports, it is possible that platinum might see bargain hunting buying increase on the coming slide in physical commodity prices. Until the macro economic outlook improves, we think that would-be buyers should wait for a slide to at least $1,526 in the October platinum contract before getting long for a position play.

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OUTSIDE MARKET DEVELOPMENTS: Equity markets both in Asia and Europe have been higher this morning, which has led to US stock indices posting sharp early gains during overnight trading. While off of its lows, the Dollar has been weaker against most major currencies during overnight trading but has gained versus the Yen. Over the weekend, the People’s Bank of China announced that the Chinese currency, the Yuan, would be allowed more flexibility in valuation and they also removed a 23-month long peg against the Dollar. Although officials continued to stress that change would be gradual, the Yuan has made both its largest one-day rise and highest close in 5 years today. An internal document from BP indicates a worst-case scenario that the Gulf oil spill could be leaking 100,000 barrels per day. The European Central Bank called for EU nations to have tougher budget rules and allow for external monitoring. There are no major US economic numbers scheduled for release today.

GOLD MARKET FUNDAMENTALS: The bull camp has to be somewhat happy with the initial action in gold today, as gold has held together somewhat in the face of developments that could have sparked an aggressive liquidation in gold prices. Apparently the Chinese indicated they would allow for a more flexible currency and that in turn has seemingly dampened interest in flight to quality instruments. With gold in the US action managing to waffle around both sides of unchanged in the early action today, it almost seems as if broad based interest in physical commodities is in some way providing minimal support to gold prices. It is also possible that some analysts will suggest that China could buy more gold with a stronger currency and it is also possible that some economists will see the Chinese news as an export of Chinese growth to the rest of the world. The gold market could also have been pressured this morning by talk that Saudi gold reserves were double what the trade had previously been factoring. However, the bull camp might try to shape that news into a positive by suggesting that many countries might be poised to hold more gold in the wake of the historical financial uncertainty facing the markets. Comex Gold Stocks were 10.795 million ounces down 431 ounces. The Commitments of Traders Futures and Options report as of June 15th for Gold showed Non-Commercial traders were net long 265,983 contracts, an increase of 2,515 contracts. The Commercial traders were net short 316,452 contracts, an increase of 5,349 contracts. The Non-reportable traders were net long 50,468 contracts, an increase of 2,833 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 316,451 contracts. This represents an increase of 5,348 contracts in the net long position held by these traders.

SILVER MARKET FUNDAMENTALS: The silver market has apparently found support from its physical commodity roots this morning, as the apparent downtick in safe haven sentiment has not undermined silver prices. In fact, silver prices are clearly outperforming gold this morning, as silver seems to be tracking with industrial metals and the global equity markets instead of gold and the US Treasury markets. After seeing a flight to quality track at times last week, the upside extension in silver prices this morning suggests that this market is able to rally off a number of different themes. Exchange Silver Stocks at the end of last week were pegged at 117.695 million ounces down 600,295 ounces. Silver stocks have increased in 13 of the last 20 days. The Commitments of Traders Futures and Options report as of June 15th for Silver showed Non-Commercial traders were net long 40,647 contracts, an increase of 3,368 contracts. The Commercial traders were net short 57,664 contracts, an increase of 2,335 contracts. The Non-reportable traders were net long 17,017 contracts, a decrease of 1,033 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 57,664 contracts. This represents an increase of 2,335 contracts in the net long position held by these traders.

PLATINUM: Like a number of physical commodity markets platinum is clearly being lifted by the Chinese statements overnight. However, in looking at the platinum action on the charts this morning, it would seem like platinum is skeptical of the bullish attitude. In fact, July platinum made a distinct gap up move initially but has given back all of the early gains. We can’t rule out an attempt to rally today, but we think that July platinum is a sell above the $1,600.00 level. The Commitments of Traders Futures and Options report as of June 15th for Platinum showed Non-Commercial traders were net long 15,841 contracts, an increase of 329 contracts. The Commercial traders were net short 18,875 contracts, an increase of 546 contracts. The Non-reportable traders were net long 3,034 contracts, an increase of 217 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 18,875 contracts. This represents an increase of 546 contracts in the net long position held by these traders.

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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia and in Europe have been mostly higher overnight, which helped US stock indices to post solid gains as we approach the US opening. The Dollar is mostly weaker this morning against the major currencies, although it was able to have a small gain against the Yen. As rumored in yesterday’s markets, China’s trade surplus during May was roughly $19.5 billion, much higher than forecasts and up nearly 50% from last year’s levels. Chinese exports were also significantly higher as was expected by the trade yesterday. Fed Chairman Bernanke said that the US economic recovery was on solid footing, but growth in job creation would lag. The Federal Reserve Beige Book indicated that economic conditions improved throughout all 12 of the Federal Reserve districts last month, although the pace was modest in some areas. Several US senators have proposed legislation that would put pressure on China to revaluate their currency against the Dollar. The United Nations approved a new round of sanctions against Iran, due to an escalation of their nuclear program. BP announced that a containment cap placed on a leaking oil well in the Gulf of Mexico had increased the amount of oil it was capturing. An auction for Spanish 3-year bonds was well received by the market as the issue saw solid demand. Japanese GDP was up 1.2% for the first quarter, in line with expectations. German CPI was up 1.2% during May, in line with market forecasts. Today’s US economic calendar includes April International Trade and Weekly Jobless Claims, both released at 7:30 AM. The final leg of the monthly US refunding, the 30-year bond auction, will have results announced at 12:00 PM.

GOLD MARKET FUNDAMENTALS: With a favorable Spanish auction result overnight, a much stronger than expected Chinese export tally and an upward bias in many global equity markets, it would seem like the flight to quality angle in gold is still being tamped down in the early trade today. In looking back to the prior trading session, the gold market saw comments from the US Fed Chairman that pointed to the potential for serious ramifications if the US didn’t move to get its fiscal house in order, but yet that type of news was unable to provide a positive bid for gold prices. In fact, news of another decline in South African gold production overnight of 6.2% from the prior month is apparently of little interest to the gold trade this morning. The market might also be under some pressure as a result of comments from China suggesting that the gold market was too small to garner investment allocation from the Chinese currency fund. However, since China also showed a noted rise in gold reserves held by the People’s Bank of China, it is possible that the potential lack of allocation from the Chinese currency reserve sector might be discounted. However, the main focus of the gold market still seems to be locked onto the ebb and flow of European debt fears and it would appear that we are seeing a lack of fresh anxiety on that front this morning. Comex Gold Stocks were 10.797 million ounces down 460 ounces.

SILVER MARKET FUNDAMENTALS: At least in the early going today, the silver market seems to have attached its wagon to the gold market again. Apparently moderately higher equities and generally positive action in the industrial metals markets is of little benefit to silver. In other words, the silver market is apparently seeing some selling off a further decline in flight to quality psychology. Even a higher energy market this morning has failed to provide support to silver and that isn’t surprising considering the recent heavy dependency of flight to quality potentials. Technical traders might note that July silver has remained below its 50 day moving average in the Thursday morning trade. Comex Silver Stocks were 117.630 million ounces down 831,599 ounces. Stocks have increased 12 of the last 20 days.

PLATINUM: With the platinum market showing positive progression early this morning, it is clear that platinum and copper are both behaving like physical commodity markets facing a slight improvement in macro economic expectations. However, it is difficult to suggest that platinum is poised to soar through resistance at $1,550 unless the equity market really extends on its initial gains. In short, we see short covering and a minor amount of fresh outright buying but without a more definitive end to the Euro zone debt fears, we have to suggest that bulls remain skeptical toward the upward track in platinum prices.

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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia and Europe have moved lower during overnight trading, which in turn put US equity indices under pressure going into the opening. The Dollar is sharply higher against the European currencies, but has lost ground versus the Yen. BP announced that their “top kill” method was unable to stop the large oil leak in the Gulf of Mexico. The Chinese official Purchasing Managers Index came in at 53.9, in line with expectations but that was a fall of 1.7 from the April figure. The Chinese Premier warned that Euro debt problems could threaten global economic growth, but also suggested that Chinese growth remains on track. The European Central Bank warned of a second wave of bank losses overnight, as well as announcing an increase of Euro Zone bond purchases. Euro Zone Unemployment was 10.1% during March, in line with expectations. Canadian GDP was up 6.1% during the first quarter, which was stronger than expected. US economic numbers this morning include March Construction Spending and the April ISM Index, both released at 9:00 AM.

GOLD MARKET FUNDAMENTALS: Somewhat surprisingly the gold market this morning is benefiting from revived Euro zone debt contagion fears and that seems to have pulled the market out of its recent physical commodity market focus. Apparently the markets keyed in on ideas that Euro zone banks were facing another wave of potential loan losses off the financial crisis and that in turn fostered an initial wave of flight to quality buying of gold overnight. Somewhat surprisingly the gold market also seemed to benefit from news of a decline in a Chinese purchasing Managers index overnight and that also seemed to break down the gold markets recent link to its physical commodity market standing. With the focus seemingly centered on financial or flight to quality issues this morning, it is unlikely that gold prices this morning are being directly lifted by news that Russian gold production, in the first four months of 2010, almost dropped by 8% over the prior year’s figures. Comex Gold Stocks were 10.737 million ounces up 643 ounces. The Commitments of Traders Futures and Options report as of May 25th for Gold showed Non-Commercial traders were net long 253,330 contracts, a decrease of 21,439 contracts. The Commercial traders were net short 296,099 contracts, a decrease of 28,198 contracts. The Non-reportable traders were net long 42,769 contracts, a decrease of 6,760 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 296,099 contracts. This represents a decrease of 28,199 contracts in the net long position held by these traders.

SILVER MARKET FUNDAMENTALS: With some negative divergence being seen this morning between silver and gold prices, one could get the impression that silver is set to act like a physical commodity market facing a renewed threat of global slowing off the travails in the Euro zone. News that the Chinese economy might be slowing down a touch, would seem to catch industrial commodities like silver in a vulnerable condition this morning, especially in the face of a rather significant rise in the US Dollar. Just to add insult to injury, the bull camp in silver also saw evidence of rising silver production from Mexico, as March 2010 Mexican silver output increased sharply over year ago levels. Tempering some of the potential negative impact from the recent silver production news, were somewhat favorable demand forecasts from Gold Fields Mineral Services. Comex Silver Stocks were 119.061 million ounces up 540,062 ounces. Comex Silver Stocks are at the highest levels since 09/18/2009. The Commitments of Traders Futures and Options report as of May 25th for Silver showed Non-Commercial traders were net long 36,398 contracts, a decrease of 8,863 contracts. The Commercial traders were net short 54,011 contracts, a decrease of 8,590 contracts. The Non-reportable traders were net long 17,614 contracts, an increase of 274 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 54,012 contracts. This represents a decrease of 8,589 contracts in the net long position held by these traders.

PLATINUM: Like silver, the platinum market forged a higher high on the charts this morning before reversing course. With the markets fearful of renewed slowing off the Euro zone debt travails and the trade also presented with talk that the Chinese economy might be slowing, the path of least resistance in platinum prices is probably set to point downward. Critical support is seen in the July contract is seen down at the $1,532 level, but a return to $1,500 can’t be discounted in the current environment. The Commitments of Traders Futures and Options report as of May 25th for Platinum showed Non-Commercial traders were net long 15,019 contracts, a decrease of 8,039 contracts. The Commercial traders were net short 18,107 contracts, a decrease of 8,824 contracts. The Non-reportable traders were net long 3,087 contracts, a decrease of 786 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 18,106 contracts. This represents a decrease of 8,825 contracts in the net long position held by these traders.

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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia were lower, but European and US stock indices have reversed overnight losses and have moved higher. The Dollar has been slightly higher this morning, mainly against European currencies. The German Parliament approved the EU debt rescue package this morning. Also EU Finance Ministers will discuss tightening budget rules and improving economic policy coordination today. The Bank of Japan announced a new loan scheme for growth industries, while keeping Japanese interest rates unchanged. German first quarter GDP was up 0.2%, in line with expectations. The German IFO Business Confidence index however came in lower than expected at 101.5. UK Public Sector borrowing for April was 10 billion Pounds, lower than expectations. The Euro Zone balance of payments for March was a 1.2 billion surplus, higher than forecast. There are no major US economic numbers due in this morning.

GOLD MARKET FUNDAMENTALS: The bear camp will probably point to the initial weakness overnight as a sign that they retain control, while the bull camp will suggest that most of the declines were reversed ahead of the US Friday morning action. It is possible that news of a favorable vote in the lower German House on the EU Stabilization plan provided gold and other physical commodity markets with a slight lift. However, with equities seemingly unable to hold initial gains in the wake of the German political news, it would seem like the slow growth or deflation view is still lingering in some markets this morning. At least in the early action today, it would appear that flight to quality fears have remained a partial negative to gold prices, but some players think that coordinated intervention in the currency markets might be seen in the coming trading sessions and given the action in gold this week, intervention might be something that the bull camp hopes to see. However, ongoing weakness in energies and other physical commodity markets this morning seems to be emboldening the bear camp. Comex Gold Stocks were 10.541 million ounces up 64,043 ounces.

SILVER MARKET FUNDAMENTALS: The silver market seemingly outperformed the gold market in the overnight action, as silver avoided a fresh new low for the move. July silver also comes into the Friday US trade sitting initially above the prior closing value. The bull camp in silver might also suggest that silver is seeing some minor outside market support from ongoing gains in the copper market but that influence is partially tempered because of noted weakness in the platinum market. The silver market did see news of an increase in silver production from a minor silver producer and therefore the impact off the supply side of the equation this morning is probably very limited. It would appear that silver continues to garner a significant amount of direction from the equity markets and that suggests silver is still focused on its classic physical commodity market fundamentals and not on flight to quality issues. Comex Silver Stocks were 117.171 million ounces down 49,894 ounces.

PLATINUM: Weakness in the platinum market this week was partially the result of fears of a return to a global recession and part of the slide was the result of weak handed longs in futures and weak handed ETF longs being forced from the market. In retrospect platinum prices were at historically high levels and they were expecting and needing strong investment demand and a favorable economy. We suspect that the market has now removed some of the favorable economy portion of platinum pricing and that leaves the market capable of respecting the consolidation lows above the $1,450 level in July platinum.

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OUTSIDE MARKET DEVELOPMENTS: After the initial euphoria, concerns over the EU emergency aid package have revived strength in the Dollar again overnight and that in turn has put the euro under renewed pressure. As a result, equity markets throughout the world are weaker this morning. A prominent credit rating agency stated that downgrades were still possible for Greece and Portugal, even with the new EU aid package in place. Also a series of economic numbers from China for March released overnight showed that Chinese CPI was up 2.8%, Chinese PPI was up 6.8%, Chinese Industrial Production was up 17.8% and Retail Sales were up 18.5% from year-ago levels, all roughly in-line with expectations, but apparently those readings were strong enough to prompt fears of a Chinese rate hike ahead. UK Industrial Production for February was up a much higher than expected 1.9%, while German CPI for March was up an in-line 1.0%. The main US economic number this morning from the US will be February Wholesale Trade, which is generally expected to be up +0.3%. There will also be a 3 Year US Treasury Note auction result posted at mid day today.

GOLD MARKET FUNDAMENTALS: A rekindling of EU debt anxiety seemed to surface again last night, with a number of flight to quality markets like gold, registering action indicative of ongoing debt sector concerns. While some players are suggesting that the Chinese numbers overnight were capable of prompting a Chinese rate hike, those numbers on their face could also be considered supportive to metals prices. Surprisingly gold prices come into the US action higher this morning despite a weaker tone in the Indian gold market overnight. Some gold players are hopeful that the gold market will be able to benefit even if calmer financial waters surface ahead, as many economists suggest that the Euro zone stabilization plan could eventually be considered inflationary. However, the flight to quality angle in the gold market appears to have been a dominating focus of the trade recently and therefore the ebb and flow of anxiety is likely to remain a big influence on gold prices. It would appear that the ebb and flow of equity prices is the primary guide on anxiety levels and therefore gold and equities look to maintain an inverse relationship. Comex Gold Stocks were 10.269 million ounces up 29,018 ounces.

SILVER MARKET FUNDAMENTALS: While silver is showing some minor weakness this morning and appears to be diverging with the gold market, there doesn’t appear to be a major negative tilt facing physical commodity markets this morning. Certainly silver and other physical commodity markets are seeing some spillover weakness from the weaker global equity market action and perhaps because of lingering EU Debt fears. The market did see news of increased physical silver production from a key Canadian silver producer overnight, but minor changes in physical supply haven’t been given that much consideration lately. It is also likely that noted weakness in platinum and copper prices this morning have served to undermine silver prices. From the weak initial action in silver prices this morning, the trade seems to be suggesting that silver is still being viewed as a physical commodity, instead of a flight to quality instrument. Comex Silver Stocks were 116.548 million ounces down 196,140 ounces.

PLATINUM: The platinum market is logically under some pressure this morning, as macro economic optimism is missing today. However, the platinum charts appear to be giving off the impression that up trend channel support just under the market at $1,673 might be solid. However, the platinum market looks to be tightly correlated with the direction of global equity markets and that could mean some initial weakness this morning. On the other hand, in the event that the July platinum market manages to regain the $1,693.50 level, that could be a sign that the bulls have regained control over the market. In order for the bull camp to regain control might require a June S&P trade back above the 1150 level.

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OUTSIDE MARKET DEVELOPMENTS: There would appear to be an improvement in the overall global economic outlook this morning, as the trade thinks the EU will bring forth an Aid package for Greece and that in turn will at least temporarily diffuse the prospect of a European debt contagion. It is also possible that the Fed’s upbeat view on the US economy and suggestions that inflation remains under control has cemented the idea that US rates are destined to remain low for the near term and that is apparently positive to stocks and many physical commodity markets. In looking ahead today, the markets will see initial and ongoing claims, a KC Fed manufacturing reading and a Chicago Fed National Activity Index from the US scheduled report front. There will also be a $32 billion 7 Year note auction at mid session and some testimony from the US Treasury Secretary later in the day that could fan contempt on the financial reform battle front. Overnight the market did see a slight improvement in German unemployment readings and that might have contributed to the slightly improved overall macro economic tone in the marketplace.

GOLD MARKET FUNDAMENTALS: While gold prices aren’t showing positive action in the early going today, there would seem to be a better physical commodity market environment in place this morning. It would appear that the flight to quality crowd in gold is a bit disappointed this morning, but it also possible that some inflation bulls in gold are also a bit discouraged because of the FOMC statements yesterday afternoon that suggested long term inflation expectations in the US remain under control. Therefore the question for the action today will be, how much will flight to quality demand wane and will buying off other themes be able to pick up the slack? However, there continues to be talk of a European debt contagion and therefore the flight to quality buying argument probably won’t be eliminated from the marketplace, even in the face of an impending aid package. In other developments, the gold market continues to see favorable Indian gold demand headlines, but at the same time the gold market is also seeing evidence of rising gold production and profits from various mining concerns. Comex Gold Stocks were 10.153 million ounces down 4,716 ounces. Stocks have increased 11 of the last 20 days.

SILVER MARKET FUNDAMENTALS: Silver appears to be positive positioned in the early Thursday trade in the wake of a weaker Dollar, higher equities and less Euro zone debt trauma. In other words, silver is acting like a classic physical commodity market, which has been presented with a slightly improved macro economic condition. However, silver and other physical commodity markets will probably remain mindful that the EU debt crisis is a long way from being totally solved. However, silver is probably heartened by favorable US Fed dialogue and perhaps the market will get some favorable US scheduled data later this morning as expectations are calling for some improvement in the US data flows. At least in the early going today, the silver market seems to be tracking the initial gains in the US equity markets. The question for silver bulls is, whether or not the market begins to turn its focus back toward the credit condition in Spain. Comex Silver Stocks were 115.000 million ounces down 95,217 ounces. Stocks have declined 12 of the last 20 days.

PLATINUM: The platinum market showed a big range up attempt that was clearly rejected overnight. In other words, the market tried to price in an all clear and the trade didn’t want any part of that argument. News of increased production from a key platinum producer for its 3rd quarter, is only a minor negative, as this market is infatuated with the demand side of the equation. For the near term, the demand outlook is simply going to remain suspect because of the Euro zone house of cards. We think that July platinum is capable of waffling around in a range defined as $1,695 to $1,720.