All things considered gold and silver prices have stood up to patently bearish dollar action this week even if a pattern of lower highs and lower lows has prevailed thus far. It is possible that today's action in the currency markets will be somewhat reserved due to a lack of critical US scheduled data.
However economic uncertainty was rekindled by the revelation that a full trade deal would not be likely ahead of US tariff escalation at the beginning of next month. Cushioning the gold market this morning are bullish comments from a Goldman analyst who predicted "sustained" buying by central banks in 2019 (in other words equaling 2018 purchases of 650 tons) and the analyst also predicted ongoing ETF inflows.
However the dollar this morning has forged another higher high and the trade was presented with news of active selling of ETF gold and silver holdings yesterday. In fact ETF's yesterday sold 245,397 ounces of gold and that lowers this year's net purchases to 1.72 million ounces. Furthermore ETF's also reduced their silver holdings by 1.43 million ounces which brings this year's "net sales" up to 8.8 million ounces.
While the World Gold Council projected a slight increase in 2019 Indian gold demand (they pegged it at 750 to 800 tonnes), those levels are still below the peaks in Indian gold demand from the past. According to a story in Reuters, the northeastern Indian state of Assam is promising $530 worth of gold to every "bride from a poor family" and that follows similar assistance to farmers and other lower middle-class recipients.
The article also indicated that $42 million was set aside for the fiscal year beginning April 1st for the gold program in the tea-growing state of Assam. While those moves are obviously pre-election efforts to garner political support that would seem to point to the end of government attempts to shift Indian savings/investment interest away from gold.
However, until the dollar shows a sustainable reversal on its charts, the outlook for the US economy deteriorates significantly or there is a negative trade associated headline, it is difficult to call for an end to the February slide in gold prices. On the other hand, there have been some very positive long-term Indian gold demand developments this week and gold has in our opinion held up rather impressively in the face of major pressure from the dollar rally this week.
Initial support and a possible target is $1,300, and then at an uptrend channel support line down at $1,298.40. However the ebb and flow of the gold market today will certainly be focused on the dollar, with a dollar price back above 96.37 unleashing fresh selling while a dollar trade back below 95.94 prompting a weekending short covering rally.
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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.
