The gold market remains vulnerable to a sudden slide back down to recent consolidation support if it appears that trade talks are taking a step forward. However, it would appear as if gold has plenty of professional support for the bull case with Goldman Sachs projecting $1600 gold next year and other financial entities also bullish toward gold from a broad range of arguments.
First and foremost in the bull argument is Goldman Sachs projections that central bankers could take down up to 20% of world gold supply in an effort to diversify from overly large dollar holdings. While some headlines overnight suggested Indian wedding season demand gains were somewhat disappointing, Indian November gold imports actually jumped in a sign that Indian gold jewelers saw the November approach of $1450 as a point to refill their inventories at cheap levels.
In conclusion, the $1450 level is presenting classic consolidation chart support and that level now appears to be seen as value by Indian consumers. It should also be noted that both China and India have seen domestic gold premium readings which we think signals their return to a firm import posture.
However, in the short term, the gold market will fight some modest pressure from restarts of several South African mining facilities which were idled due to power issues.
Another minor negative for gold to start today is a liquidation of 53,325 ounces from ETF holdings yesterday with silver also seeing an ETF holding reduction of 2.33 million ounces.
While prices are likely to see some reaction to today's FOMC dialogue, we doubt there will be any definitive change in US Federal Reserve policy. However, in the event that the Fed floats anything more than passing praise for the US jobs market that could be taken as a sign of a shift back in favor of tightening.
The resiliency of the bull camp in the gold market was present yesterday when the trade spun rumors of a possible delay in tariffs into the storyline that a delay in tariffs would also mean a delay in getting a deal. In other words, seeing the US delay tariffs could put the trade negotiations back into limbo again.
We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.
Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.
