Gold and Silver Vulnerable

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The Asian equities markets are tumbling with Japan leading from the front. The rising Yen and continued dispute with China has weakened the Nikkei as investors wary of weak trade relationship. Further, the Chinese markets have also taken about turn and are down as traders face threat of slowdown amid lack of approved infrastructure funding after the state sanctioned $157 billion investment. The lack of demand for metals in China see the metals pack trading down by 0.8 to 1.8 percent at LME electronic platform.

In Europe, the weekend developments indicate that Spain was negotiating with the European Commission on plans to introduce a new Spanish rescue plan. Spain will release the result of bank stress test as well as the first drafted budget for 2013 this Thursday, in addition to a set of economic reform measures.  Traders are very worried about news coming from Spain.

There were also comments that Spanish government was taking actions to meet conditions set by the troika, which made a growing number of investors believe that Spain is forced to search for a full rescue and this may help pave road for the ECB to provide funds for Spain. Nevertheless, German Finance Minister Wolfgang Schaeuble said clearly that Spanish government did not require additional rescue from the Eurozone’s rescue funds, and the real problem of the country was how to gain market confidence. Further, the recent IMF statement reveals that it would temporarily stop negotiations with Greece and all this has weighed on the 17 nation shared currency.  Rumors last week is that Greece would be delayed until after the US elections, which, might indicate some negative affects from the decisions in Greece.

Eco data today is fairly light, the German IFO numbers are likely to remain mixed and may support a slight recovery in the afternoon.

It will be news fro the the US that might affect the strenght of the USD, as  releases of Chicago fed and Dallas manufacturing may continue to remain weak and may weaken base metals later today.

The yellow metal  is poised for a breather at the early Globex with a slid of over $15 from last weeks close.

Chancellor  Merkel and French President Hollande faced a bottleneck situation on introducing joint oversight on the region’s banking sector. Expect gold to remain under stress for the day. According to the weekly PVO analysis, prices rose slightly while volumes declined and open interest rose marginally and at the slowest pace in last six weeks. This means market is attracting late buyers and early shorts and  is vulnerable to a sharp correction.

Silver drifted lower by over a percent at the Globex. Silver is faced with weakness in industrial metals and a decline in precious metals today. As mention above, silver is likely to stay weak for the day.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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