With the equity markets throwing off a minimal amount of risk on sentiment, the dollar ranging upward again and a lack of trade news from Beijing the bear camp in gold and silver has control to start the trading week. Clearly the market discounted news that Chinese gold reserves at the end of January increased to 59.94 million Troy ounces compared to 59.56 million Troy ounces at the end of December.
The bull camp is facing some adversity from the magnitude of the net spec and fund long which weighed in at 143,772 contracts one month ago (the latest report out because of the government shutdown). In fact, since the last COT report was released, the gold market finished $24 an ounce above that level last week which could mean the net spec and fund long to start this week is potentially at the highest level since the first quarter of 2018.
The Commitments of Traders report for the week ending January 8th showed Gold Managed Money traders reduced their net long position by 22,763 contracts to a net long 49,948 contracts. Non-Commercial & Non-Reportable traders net sold 22,875 contracts and were net long 143,772 contracts.
In short, we see a major trend decision dictated by the direction of the Dollar or perhaps even equities as they might be the first to register the outcome of the trade talks.
The bear's control is highlighted this morning by the markets failure to benefit from reports overnight, of a 64% increase in monthly Indian gold imports. Clearly government handouts of gold ahead of the election appear to have sparked the need for higher gold imports.
In a negative development exchange traded funds reduced their holdings of gold by 60,661 ounces at the end of last week which was the third straight day of withdrawals. It would appear as if the May silver contract has found some measure of value around the $15.75 level and given a dual focus on safe haven from trade issues and classic bullish physical demand stories of late, silver might fare better than gold this week.
In fact, the silver market over the past several weeks has seen a number of bullish big-picture classic fundamental research studies bringing out the long-held supply deficit situation and any progress on trade talks could see silver gain on gold into the end of this week. Unfortunately, a breakdown in trade talks probably results in a quick trade back below $15.50.
The January 8th Commitments of Traders report showed Managed Money traders in Silver were net long 42,808 contracts after net buying of 12,467 contracts. Non-Commercial & Non-Reportable traders added 11,268 contracts to their already long position and are now net long 70,132. Not surprisingly exchange traded funds also reduced their holdings of silver by 54,988 ounces and that was the fourth straight day of outflows.
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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.
