OUTSIDE MARKET DEVELOPMENTS:

 Asian equity markets were mixed overnight despite Chinese PMI numbers that could have lent some fresh support to equity prices in that region. The Hang Seng and Australian markets were also lower overnight, with the Taiwan market lower off talk of a possible capital gains tax on stocks. The Nikkei actually managed to post positive action overnight. European stocks were mixed overnight, with losses in the FTSE and German DAX apparently seen off of European and French manufacturing weakness. Fortunately positive UK manufacturing and stronger Chinese PMI readings generally provided a cushion for the global economic outlook overnight. US stocks were marginally weaker overnight, but the US trade continues to see predictions of an intermediate top in US equity prices ahead. The US economic report slate today contains Construction Spending and an ISM manufacturing report. The Construction Spending reading is expected to rise, as favorable weather might have contributed to an early start to the US construction season. The trade also expects to see a modest rise in the US ISM report, which would dovetail with positive data from China and the UK overnight.
After a minor new high for the move overnight, June gold prices have fallen back below last Friday's close. As in a number of other markets, gold saw some initial lift off favorable Chinese PMI figures but subsequently that positive economic vibe was mostly lost. Slack economic numbers from the Euro zone might have contributed to the deterioration of macro economic sentiment that continues to plague the global economic outlook into the early US Monday trade action. An ongoing Indian jewelers strike might be another element tempering the bull case in gold, as imports of gold and silver in that country have been stalled as Indian special interest groups attempt to get an import duty reversed. On the other hand, gold might ultimately get a lift from the US scheduled data flows, especially since positive numbers from the US would join favorable numbers from both China and the UK overnight. The gold trade might begin to look forward to week ending US payroll readings, as the pace of the US economy has become a major component of any positive view toward the global economy. A minor drag against gold prices this morning came from news of sharply higher earnings results from Russian gold mining concern Polyus, as higher profits might foster concern of increased supply ahead from that company. Comex Gold Stocks were 11.350 million ounces down 57,197 ounces. Gold stocks have declined in 12 of the last 20 days. The Commitments of Traders Futures and Options report as of March 27th for Gold showed Non-Commercial traders were net long 160,051 contracts, an increase of 21,892 contracts. The Commercial traders were net short 197,956 contracts, an increase of 22,184 contracts. The Non-reportable traders were net long 37,905 contracts, an increase of 291 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 197,956 contracts. This represents an increase of 22,183 contracts in the net long position held by these traders. The gold market was initially able to claw out minor gains overnight but the market quickly gave back those gains in a move that suggests the bull camp lacks resolve. In fact, doubt toward US and global equity markets generally remains in place, as the US and China don't seem to be providing definitively positive leadership. However, we suspect that the gold market will find some fresh support in the wake of the scheduled US data flows, but then the market is likely to see gold prices fall back again. The Chinese numbers are apparently just good enough to quell fears of severe slowing, but the global view toward the economy remains somewhat anemic. Therefore, traders shouldn't be surprised to see another bid to rally above $1,674 this morning, but we suspect that area will offer fairly solid resistance into mid day and into the afternoon trade.