Quiet End To A Defensive Week

We end the week in gold within a couple of dollars of where we began. It was a defensive week for gold bulls and the battle ended up a draw as there was plenty of probing to see where support and resistance would establish themselves.

Silver held firm to its impressive gains, in spite of a rather startling rise in inventories. As we said in our daily reports this week, however, a lot of silver's strength is based on its having been undervalued for so long. Investors are catching up with market realities. There is also increasing demand in the industrial sector.

The consolidation in gold and the strength in silver will be tested next Thursday when U.S. non-farm payroll data is released. (It will be issued a day early because of the Friday, Independence Day, holiday on which government offices and markets will be closed in the U.S.)

We would be surprised if any big moves come before the holiday and only a sharp movement in jobs created and/or the unemployment rate is liable to move the precious markets much. Surveys have experts split on next week's movement, with sentiment looking slightly to the upside.

Stocks today were mixed to lower around the globe. The yields on U.S. 10-year notes were marginally higher.

No solid news emerged this week. It seems as if the Ukraine crisis is slowly passing, with Ukraine signing a trade pact with the E.U., a ceasefire more or less holding in the eastern part of the country and Crimea no longer an issue.

The quid pro quo for Russia's simmering down was that Ukraine would not seek to re-attach Crimea, a stance for which Russia has grudgingly given its approval to the E.U. agreement. The "rebels" in the eastern part of Ukraine will probably be hung out to dry by the Russians although the fanatics will most likely be granted some form of asylum in the mother ship.

Every once in a while it's good to look at macro conditions.

The strongest headwinds that gold (and soon silver, too) will face is the faith in policy being made in the banking centers of the world. These stem from central or national banks. So far, the financial community is trusting the level of currencies and the values of equities and other assets. The positive tailwinds that could help gold in the next 3 to 6 months can be reduced to one word: inflation.

As always, wishing you good trading,