Gold & Silver Daily Market Recap: May 17th, 2012

Precious metals had a small bounce after 4 days of heavy selling. The metals bounced higher after the release of sub U.S data.

Last night put a little fuel in the fire for QE3 as FOMC minutes from April stated that the committee again started to mull the use of further QE if economic conditions warrant it. This started the rally late in the electronic session and over into the Asian session; which saw good physical buying, but we will touch on that later; taking the European session which is where the full bore metals rally gained steam. QE3is unequivocally bullish for gold as it is an all important inflation hedge. Initial jobless claims came in at 370k from a forecast of 368k, which isn’t bad but it shows that the economy has grinded to a halt as it seems to be stuck in this 360k to 380k range.  The talk of QE3 shall remain for the coming months if this numbers don’t slowly start declining. The metal generally rallies when central banks flood markets with liquidity as it is seen by many as a store of value that cannot be debased. More QE in the U.S. should push the dollar down too, removing another barrier for gold.

Greece remains a hotbed, but things have quieted down since the appointment of judge Panagiotis Pikramenos as interim prime minister until new elections take place June 17th. The market is entirely consumed with what is going on in Europe and, in particular, Greece and whether they are going to remain in the EU. Investors also have their eye on Spain whose medium-term borrowing costs rose sharply at a bond auction on Thursday on concern about that country's banking system and economy.

Physical demand showed some life in Asia as the lower gold make the bullion very attractive to bargain hunters.  Dips below $1530 we bought up pushing the metal back over $1550. In Tokyo, Okayama Metal & Machinery has become the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies in a report in the Financial Times.

Spot silver also rallied after touching low levels of $27.22, the metal jumped to $28.34 before profit taking kicked in and the metal eased towards $28.00. The gold silver ratio ran into over head resistance and pulled back to 56.00 after touching a high of 57.17.

Precious metals had a very productive rally today but this move was widely expect as the metals were severely oversold.  Gold has made the imperfect double bottom in the $1530 area, we could see retracement back to $1605, but heavy selling could emerge as long as headwinds such a Greece remain the main headline.

May 17th Closing Prices