OUTSIDE MARKET DEVELOPMENTS:

 Equity markets in Asia were mostly higher today. Stocks in Europe also showed some strength to start the Tuesday trade. Early indications are that the US markets will open with moderate gains later on today. The US Dollar was slightly weaker against most of the major currencies to start this morning, but it was also making some gains against the Aussie. In the overnight action, the markets saw a slight rise in a German Ifo business climate index and the trade also saw some positive comments toward that economy in the wake of that release. US economic data to be released this morning includes Housing starts and permits, two private chain store sales reports and a 5 Year note auction.
The gold market this morning is catching a slight lift from a partial risk on vibe, that in turn was the result of favorable Asian equity market action and or a better than expected German Ifo business index reading. The bull camp is suggesting that a return to the even number $1,600 level is a moral victory, while the bear camp might suggest that the situation in the euro zone still hasn't come under firm control. The bear camp in gold might be hopeful of some soft US housing figures, as that could suggest a key sector of the US economy remains in trouble and that in turn could make it difficult for the US economy to continue to weather an ongoing Euro zone crisis. However, it is possible that some traders are attempting to fan talk of a Santa Claus rally, especially in the wake of the international equity market recovery overnight. On the other hand, currency market action this morning is only partially supportive of gold and other physical commodity markets and the trade will need to get beyond the European equity market close, in order to keep the currency influence on gold positive. While the trade might begin to thin because of the upcoming holiday, seeing a fairly active US economic report slate through the end of this week, might keep the trade in gold rather active. At least to start today there is a partial risk on vibe in place, especially with equities also trading higher and therefore gold might even be able to overcome some slack US housing figures later this morning. Comex Gold Stocks were 11.431 million ounces up 41,208 ounces. Comex Gold stocks are at their highest levels in the past 10. While February gold this morning initially failed to claw out a higher high for the move, gold prices were holding above $1,600 and if they garner a positive vibe off the scheduled US data that news could push February gold prices up to another new high for the move. With an EU official overnight suggesting that a breakup of the Euro zone was "unthinkable", he probably serves to keep that potential outcome in the mind of the markets. In other words, even though there is relative calm in the Euro zone situation to start this morning, fears of a bad outcome remain in place and that probably serves to keep some would-be gold buyers on the bench. At least in the near term, the bull camp will need positive scheduled data and as little dialogue as possible from the Euro zone. Critical support in February gold is seen at $1,603 and then again down at $1,597. Initial resistance today is seen at $1,611.50 and then again up at $1,615.