Daily Market Update 12/30/11

GOLD

At 11am PDT, Gold was up $27.50 per ounce, trading at $1,569.50 on excellent volume for a holiday weekend. Today’s sharp rally just indicates how oversold the market was yesterday. As I stated yesterday, gold at the current price, is an extraordinary opportunity to own it at the low end of the established trading range. Next week, when all the commodity traders and commission houses come back on line it could drive gold back above the $1,600 level.

The recent correction in the gold price was caused by a combination of negative lease rates, light year-end volume, negative technical analysis signs, weakness in the jewelry trade in the U.S. and India, and a stronger dollar. These issues drove down the price of gold on Thursday morning to $1,524 per ounce. I believe what we saw this week was the clean out of the small gold/silver commodity contract owners. This type of volatility happens ahead of a major move higher, as it cleans out the weaker buyers with margin calls and executed stop loss sell orders.

SILVER

Silver had a bullish trading range today of $27.74 on the low and $28.59 on the high. Good volume of trading considering it’s a holiday weekend and many floor traders are out. After hitting $26.15 per ounce yesterday, we have seen bargain buyers come in. This market needs to establish a new trading range, hopefully $28 to $30 to build up confidence for new purchases. At 11am PDT, Silver is trading at $28.01, up $0.50 on the day.