While the charts remain vulnerable with another lower low probe for the week yesterday, the bull camp has to be cheered slightly because the gold market posted another rejection of the $1,275 level and prices are showing some strength to start today.
Fortunately for the bull camp the Dollar has faltered from the very definitive upward thrust yesterday and therefore currency related pressure is missing to start today.
Apparently gold continues to draft some safe haven support from the realization yesterday that US/Chinese trade talks were not as close to resolution as was hoped for last week. However, the market is comforted by news that China was found to be adding to its central bank reserves!
The Chinese addition to reserves was reported to be the first "add" to reserves in two years, but we think the "add" is simply the first time the Chinese have allowed the inflow to be known. In the current environment the Chinese can shape the gold reserve investment as a sign they are re-allocating capital away from US Treasuries.
Another development overnight that might add to the initial bull tilt is word from Asia of increased Wedding season buying in India.
A slightly negative impact on gold was seen yesterday following an EU parliament vote to reject a proposal to would have allowed greater liquidity rules for banks trading gold in the euro zone. However we don't think the gold market rallied off the hope of more European gold trading liquidity.
Another tempering development facing the trade today is bearish comments from Mark Mobius who cautioned gold buyers that the Fed could still hike rates this year. In the end the bias is up but the bull case doesn't dominate unless the Dollar falls back below 96.00. Total gold derivative holdings overnight fell minimally to 56.5 million ounces.
We invite you to signup for 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.
