We think the gold market remains vulnerable as the bullish buzz into the February high has been lost and the charts have turned negative with a series of lower highs. In fact, we would have expected the gold market to have benefited more from the distinct washout in the dollar late yesterday and more specifically because of distinct tensions between India and Pakistan (Pakistan reported they shot Indian war planes flying over Pakistan), but instead both gold and silver have simply waffled around unchanged over the prior 24 hours!
However, we would not trade against a weak dollar condition especially with April gold managing to generally respect the $1,325 level over the last five trading sessions. A minor amount of support might be seen this morning from modest strength in gold prices in India off reports of jeweler buying but a weak currency combined with the recent 8 month high limits overall Indian interest.
Unfortunately for the bull camp, total ETF gold holdings have continued to erode with the latest tally 56.1 million ounces which is the lowest level since January 18th. It is a little surprising that gold has not drafted support from a sweeping strike threats throughout South Africa with reports of 15 mining companies potentially impacted.
In the end, the overall trend looks to remain up but current support from the uptrend channel support line of the last six months is seen at $1,317.10. While the most recent COT positioning report released is old and prices since the report have rallied $36 into the highs, the overall positioning is only modestly long and still capable of fueling gains if the dollar continues to slide and/or an unforeseen safe haven incident surfaces.
Tuesday's Commitments of Traders update showed managed money traders were net sellers of 2,038 contracts of gold for the week ending February 12th, reducing their net long to 64,494. Non-commercial & non-reportable traders were net sellers of 4,992 contracts, reducing their net long to 149,094. In silver, managed money traders were net sellers of 5,636 contracts, reducing their net long to 43,070. Non-commercial & non-reportable traders were net sellers of 2,205 contracts, reducing their net long to 76,938.
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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.
