Noted weakness in gold was seen in the face of slack US economic data and gains in the Dollar yesterday. While
gold did see a slight bounce off reports of military action in the Ukraine, the gold trade wasn't exactly sparked into
a buying mode because of increased geopolitical tensions. Therefore, one might come to the conclusion that gold
is for the most part still tracking physical commodity fundamentals again. It is also possible that negative Chinese
gold demand stories earlier this week and talk that gold might be involved in Chinese commodity loan schemes
sparked a wave of long liquidation on Tuesday. However, some of the debate on the focus of gold was settled on
Tuesday, as gold was under noted pressure in the face of a significant increase in anxiety toward the situation in
the Ukraine and gold also seemed to fall in the wake of slack US regional manufacturing results. It is logical to
assume that part of the significant losses in gold yesterday were the result of technical stop loss selling, especially
after June Gold fell below a potentially critical even number price level of $1,300. Some players cited the
anniversary of a historical washout in gold yesterday as a catalyst for the slide, but we think a combination of
slack US data, weakness in equities and concerns that Russian actions might provide a further drag on the global
recovery as additional reasons for the sharp slide drop in gold prices. The world's largest gold ETF saw their gold
holdings increase by 0.60 tonnes on Tuesday, which is the first time that their holdings have risen for 2 straight
sessions since March 21st-24th. Comex Gold Stocks were unchanged at 7.918 million ounces. In another
supportive development an analyst overnight predicted significant tightening of gold supply into 2015 as reduced
capital expenditures, deeper mining and reoccurring labor troubles in South Africa should restrict supply going
forward. Apparently Chinese GDP figures were acceptable and Chinese Retail Sales were slightly positive but
that doesn't seem to have resulted in a significant improvement in economic sentiment toward China. Pushed into
the market, we would still prefer to buy June Gold on a dip to $1,289, which is a normal retracement of the
December to present rally. We continue to think that the bull camp needs to see the Ukraine situation resolved
peacefully and they also need to see a pattern of gains in equities to rekindle a sustained uptrend pattern. Initial
support today is seen at $1,284.40 in June gold.

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