While the gold and silver markets definitively favored the downside yesterday, prices in the end continued to respect what should be considered solid consolidation low support levels. Both gold and silver look to enter the last trading session of the week within two week old sideways consolidation patterns but breakout moves might be difficult to orchestrate this morning given a thin US economic report slate.

However gold should draft support from a second Chinese new loan rate reduction this month, initial weakness in the dollar and ongoing anxiety from the Middle East situation. In addition to the US VP reiterating Iran as the likely source of the recent drone attacks and labeling the aggression an "act of war" the Middle East situation should remain in the headlines as a key element of the bull case.

It should also be noted that Saudi Arabia has launched attacks on military targets in Yemen overnight which isn't all that surprising considering that some factions inside that country claimed responsibility for last weekend's terrorism.

Another potentially supportive element for the gold market was seen in India where the government chopped corporate taxes and provided a $20.5 billion tax break to stimulate private investment and growth. Indian equities soared creating favorable conditions for the retail purchase of gold in the wake of that 5% reduction in the corporate tax rate.

Gold should be supported as a result of a 4th straight day of ETF purchases while silver should be undermined slightly as a result of a 1.4 million ounces liquidation of ETF holdings overnight particularly because that was the 3rd straight day of outflows.

From a technical perspective, the pattern of lower highs and declining volume in gold since the early September high could suggest traders initially balked at prices above $1,525, but we could also point out a slight hook up in open interest on the recent 9 day consolidation pattern as a sign of accumulation buying and the ongoing existence of a bull market.

We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.


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.