The precious metals complex soared yesterday in a move that seemed to be outsized. Nonetheless, the dollar washout & reversal was indeed significant and therefore gains in gold in particular were justified. Apparently some traders think there will be progress on US/Chinese trade talks this week and that in turn is expected to set the stage for significant additional downside safe haven liquidation in the dollar.
However, there have been several supply sides developments fueling buying this week with an illegal Brazilian rainforest facility shut down and other shafts closing because of a lack of output. Gold should also get additional lift from the prospect of worsening trade tensions between the US and EU as rumors suggesting the US might be poised to raise tariffs on imported European vehicles resulted in other rumors suggesting that the EU would in turn raise tariffs on US vehicles.
In short, seeing another US trade war front open up, adds to global economic uncertainty and that could push investment funds in Europe toward gold and other hedge vehicles. Certainly the most recent delayed COT positioning report understates the net spec and fund long position in gold as prices from the last report have rallied $32.
Fortunately for the bull camp, the gold market in our opinion isn't dramatically overbought until the net long is above 250,000 contracts. Gold positioning in the Commitments of Traders for the week ending January 29th showed Non-Commercial & Non-Reportable traders net long only 144,028. Silver positioning in the Commitments of Traders for the week ending January 29th showed Non-Commercial & Non-Reportable traders net long 73,727.
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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.
