Obviously the charts are severely damaged this morning in the gold market and it would appear as if a shift down in trend has already taken place. With the dollar showing signs of finding an interim low (clearly supported from the US payroll results) and the gold market short-term overbought from a six day low to high rally of $50, the market should be vulnerable going forward this week.
The gold trade should also be concerned that investors sold the most ETF holdings Friday in 4 months. Certainly the significant event unfolding from Venezuela could return a safe haven bid to gold and silver, but we think the rally is temporarily done for now especially with Chinese buyers on holiday and Indian buyers were being deterred by "lofty" prices.
Furthermore with the most recent positioning report in gold showing a net spec and fund long of nearly 150,000 contracts and the market from that mark off date into the high Thursday posting a gain of $53, the net spec and fund long might now be above 200,000 contracts.
In short, without a fresh low in the dollar index below 94.87, a correction in gold appears to be in motion. The Commitments of Traders Futures and Options report as of December 24th for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 149,597 contracts. This represents an increase of 43,904 contracts in the net long position.
The silver market also damaged its charts with a significant reversal at the end of last week and has injured the charts further this morning. Also, the silver market was certainly short-term overbought with an eight day low to high rally of $1.00!
The Commitments of Traders Futures and Options report as of December 24th for Silver showed Non-Commercial and Non-reportable combined traders held a net long position of 39,942 contracts. This represents an increase of 4,908 contracts in the net long position held by these traders.
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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.
