Daily Market Report 05/17/12

GOLD
Finally, some bullish Gold news today, which has driven up the value (see below.) Yesterday, the market action clearly showed that the Gold market was oversold, with a volume of 253,181 CME June Gold contracts traded and reaching a low $1,526 per ounce, closing at $1,536, holding above the $1,535 key support level. Yesterday’s big question was, are we going to see consolidation around the support level, or will it quickly retrace part of the decline? And today’s rally answered that question. At 11am PDT today, Gold is up $33.20, at $1,572.80 per ounce on very active trading.

QE3 On the Way!
The Philly Fed manufacturing index fell to a minus 5.8% from a positive 8.5% in April, well below expectations. Economists polled had expected the index to increase to 10.0. Reading below zero indicates that more companies are contracting instead of expanding. The new-orders index dropped to -1.2 from 2.7 in April and the employment index, a gauge of hiring expectations, also turned negative. This is one of those important indicators that the Federal Reserve monitors to make a decision on the next round of quantitative easing. QE3 will be unequivocally positive for Gold as it is an inflation hedge.

China Still Number One Gold Consumer
The World Gold Council just reported that China remained the world’s top Gold consumer for the second quarter in a row, with its Gold consumer demand up 10 percent to 255.2 tonnes for the first three months of 2012.

Guess Who’s Buying Gold Again?
Prudent Money, with an understanding of Gold’s long-term diversification benefits, continues to accumulate Gold as seen in the latest SEC filings. And, billionaire investor, George Soros, significantly increased his shares in the SPDR Gold Trust in the first quarter. Soros Fund Management nearly quadrupled its investment in the largest exchange-traded Gold fund (GLD) to 319,550 shares ($49 Million), compared with 85,450 shares ($13 Million) at the end of the fourth quarter.

SILVER
Silver trading pretty much mirrored what Gold was doing. After reaching an extraordinary low of $26.68 yesterday, the Silver price stabilized above $27 and today actually reached $28.98 before seeing any selling. Right now, at 11am PDT, Silver is up $0.80, trading $28.02 per ounce with excellent volume.