Trade Deficit News Briefly Lifts Precious Metals

Last Wednesday, following weak economic data and a dovish FOMC statement, precious metals were unable to extend a rally that had finally broken above key resistance levels and sold off sharply on Thursday and Friday. This week has started off with a rally as renewed buzz about Greeceā€™s problems and a continuation of weak economic data have supported our market. Yesterday, the closely watched U.S. trade deficit ballooned to a level not seen since March of 2008, which briefly pushed gold back to $1,200.00, but sellers were lurking and the balance of the day was spent trading in the mid $1,190.00s.  On the positive side, we have seen a noticeable increase in physical demand from Europe and Asia, which is supportive, but global interest rates continue to move higher as bonds sell-off and this is likely to weigh on gold.

Getting back to my original thought now, this Wednesday morning feels a lot like last Wednesday afternoon felt to me and my concern is if we do not see gold make a push above $1,200.00 today the market could be susceptible to another sharp fall in prices tomorrow or Friday. Silver, currently at $16.65, is trading constructively and could be the catalyst for a move higher as it trades above the 10, 50 and 100-day moving averages. Gold at $1,195.00 trades just above support at $1,192.75 (10-day average), and $1,190.50 (50 day average) while resistance looks formidable at $1,200.00 and $1,210.25 (100 day average).