Gold & Silver Daily Market Recap: May 18th, 2012

A strong rally for precious metals with sentiment shifted towards a likely hood of QE3 as poor U.S data continues to disappoint. The minutes from the Federal Open Market Committee meeting in April raised the likelihood should the US economy worsen.

Spot gold rallied $24 to $1597, its highest level on the past week as investors geared up for what could be another round of QE3. The Philly index showed that the business outlook for the Federal Reserve District had worsened coming in at -5.8 for May, vs. an expected 10.0. Gold still rallied despite a strong U.S dollar, the euro sunk to a low of 1.2640 in European trade with Greece and the rest of the Eurozone still grabbing headlines. Ratings agency Moody's cut the credit ratings of 16 Greek banks, while Fitch cut the country's long-term credit rating.

“The data probably raised expectations of further Fed quantitative easing, a bullish scenario for gold (although not in our view, not a necessary factor to be positive on gold over the long term).” Said Standard Bank in their daily note

The yellow metal took out resistance on the way up of $1540, $1565, $1575 and now is just shy of $1600 which bodes well to start next week. Market participants are now focused on the G8 meeting that starts tonight and runs into Saturday. This could bring volatility on the Sunday open of the market and will be ultimately the deciding factor whether the metal can hold its gains of the past 2 days.  We have seen a slight shift in investor’s mindset as the Euro was making new lows while gold held steady.

"There has been a re-evaluation of gold now. There's a cautious flight to quality that's attracting buyers, some traders may also be covering short positions, especially after a disappointing US manufacturing report“ said gold options trader Anthony Neglia of Tower Trading NYC

While a 2 day rally doesn’t necessarily mean a shift in sentiment it has given the bulls some relief as it was an exit of mass proportions over the past week.  We like to refer to what happened as a “dash for cash”.  The market is slowly seeing bids creep back into the market as investors still believe a Greece exit from the Eurozone is in the cards.

May 18th Closing Prices