GREEK PROBLEMS PERSIST

Precious metals are lower this morning, even though the dollar is down. Oil is unchanged and the Dow is up 35 points. The metals this morning seem to be quietly tracking the euro. There is some weakness in the euro as the offering of Greek debt yesterday did not go well and Greek bonds came under some slight selling pressure, which brought the market focus back on these debt issues facing Europe. At the moment gold is sitting in the middle of a trading range, which is basically a sign of consolidation. Activity in the futures pits is likely to remain thin due to the Passover holiday and the approach to a long Easter weekend. In fact, with a slight correction today it is probably an excellent buying opportunity. I suspect that next week will provide better movement to the upside.

BofA/Merrill Lynch and others are forecasting that there will be strong demand for physical gold from India, China and other parts of Asia during the April/May time frame. Based on that, they see gold prices moving. BofA sees gold above $1,150 in that time frame and sees gold above $1,200 by October/November. This presents an excellent opportunity to add to holdings if you wish to do so.

Consumer confidence in March jumped considerably to 52.5 versus 46.4 in February. Moreover, the Case Schiller home price data indicates that home prices are beginning to firm and perhaps even rise in some parts of the country. However, interest rates on mortgages have risen considerably over the past few weeks. This is the first year-to-year growth in the housing market in three years. Nevertheless, the report was somewhat mixed as the rebound in housing prices seen last fall seems to be fading. A good part of the improvement has been due to the $8,000 first time homebuyer tax credit. Price gains were seen in Los Angeles, San Diego and a few other markets. However, Las Vegas, Seattle and Tampa reported new price lows for the current cycle. Later in the week we get the unemployment data. It is expected that the economy added about 200,000 jobs in the previous week. A good part of that is expected to be due to the hiring of census workers by the Federal government. That data will be sorted out later. However, any indication that the economy is beginning to improve to a significant degree would likely be met with rising inflation expectations. That should be bullish for the gold market. Another encouraging signal came from the Redbook Retail Sales data, which were up 1.2% for the first four weeks of March versus February.

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