Gold & Silver Daily Market Recap: July 12th, 2012

Another wild session in the precious metals markets, after both spot gold and silver languished on their lows of $1554 and $26.48 respectively the metal rallied back in the afternoon session as short covering dominated the market.

The release yesterday of the Federal Open Market Committee minutes led to a plunge in precious metals, spot gold fell to $1555 as the Fed's still never hinted at any sort of QE3.  The metals market was clearly disappointed that the minutes June 19-20 meeting gave no clues that extra US monetary easing was pending despite the fact that Central Banks around the world have all under taken some sort of stimulus.  The minutes showed the Fed was open to buying more Treasury bonds to stimulate the economy but that the recovery might need to weaken for a consensus to build, however, the committee also has become more conscious about the risks and possible unintended consequences that might result from additional easing.

"The market can pretend that QE3 isn't important, but it is one of the fundamental factors that is supporting gold prices," Natixis head commodities analyst Nic Brown said.

Equities and metals sold off in tandem as the U.S dollar and U.S treasuries were was once again in favor as they are now perceived as safe haven.

Thursday saw a very upbeat initial jobless claims dropping to a low of 350,000 shedding 26,000, the biggest drop since March of this year. Of course there was a caveat to that surprising number. The Department of Labor has indicated that there are some seasonal reasons for this better number, including fewer factories having closed for maintenance so far this summer, which means that more than likely the number will be revised higher next week. The Euro fell sharply against the U.S to 1.2164 before recovering before the close. The single currency is getting hit from all angles and is looking to target the 1.2000 area.

For the last 10 weeks gold has struggled to break free of a range of $1,630-1,550 and this week has seen its range become slightly tighter trading in its narrowest band since late April, with less than $40 between intraday highs and lows. A note to watch is the increase in July 1600 call options open interest has jumped significantly which suggests trader are betting that in the coming weeks gold will overtake $1600. The option expiry is July 26th.

Spot silver remains depressed trading to a session low of $26.48 before recovering alongside equities. The Dow was down 42 points as the decline was in line with the upbeat U.S economic data. Spot silver has struggled by enjoyed one of its better days jumping in afternoon trade to $27.40 as traders covered shorts. The most closely watched indicator for the Chinese economy is the quarterly economic growth which is due out Friday, expect silver to react to this report.

July 12th Closing Prices