After showing some resilience over the last two weeks the gold market appears to have lost its bullish vibe and sits just above a key failure point on the charts in the early trade today. In fact with the gold market down six dollars in the face of another upside breakout in the dollar it is clear the market is facing increased currency market pressures.

One could also suggest that some of the selling in gold is the result of declining safe haven psychology from both trade and budget. In fact it would appear as if the president is poised to sign a budget bill and he has also indicated the potential for a 60 day delay in the next round of tariffs on China. However Chinese trade data overnight could strengthen the Chinese bargaining position as their exports increased and showed diversification away from the US.

While the gold market has not paid that much attention to physical production news in price discovery South African gold output for December showed another large contraction of 31% relative to year ago levels! Declining South African gold production has been a very entrenched trend since 1994!

In the end the gold market faces safe haven liquidation currency related selling and technical stop loss selling if the April contract fails to hold $1,306.40. Fortunately for the bull camp, open interest in gold has declined consistently since its January peak of 537,605 contracts and that could mean a lot of weak handed longs have already moved to the sidelines on the recent high to low slide of $25.00.

Unfortunately for silver bulls, the May contract has posted noted chart damage this week and the bulls will "need" to see very definitive positive risk on conditions directly ahead to avoid a setback to $15.50. An added weight on the back of silver is overnight news coverage highlighting noted outflows of money from ETF silver instruments this year off the fear of slowing global economic activity.

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Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.