The gold and silver markets finished last week with the worst losses in nearly 2 years and saw the pressure primarily from an upside extension in the US dollar, risk on psychology from equities and from Goldilocks US economic readings. In other words, the precious metals clearly appear to have lost a measure of economic uncertainty premium at the same time that currency and technical damage continues to force a wave of longs from the market.
While the most recent positioning report continues to be "old delayed", the report was calculated near the peak of prices and probably overstates the net spec and fund long positioning into the beginning of the new trading week. Certainly the long positioning was vulnerable and deserving of some balancing but following the report, April gold prices into the low this morning have declined by $55 an ounce and that should reduce the stop loss selling threat somewhat.
Gold positioning in the Commitments of Traders for the week ending February 19th showed Managed Money traders added 44,217 contracts to their already long position and are now net long 108,711. Non-Commercial & Non-Reportable traders net bought 43,278 contracts and are now net long 192,372 contracts.
However, given the damage on the charts, minor strength in the dollar and the Goldilocks economic condition (brought on by mixed data and on hold trade and diplomacy) the bear camp retains a fundamental edge. Unfortunately for the bull camp, the inability to regain the $1,300 level suggests the bull camp remains on the run.
Not surprisingly, the silver market was dragged lower by the gold liquidation wave and we can't rule out further declines to consolidation high support from the September through December sideways consolidation down at $15.00. From a bigger picture perspective, the trade is starting to note the extreme in the gold/silver ratio (as it approaches 85) which is nearly the highest since 1990.
According to the Hecla CEO, he expects silver to gain significantly on gold this year as the ratio turns. Unfortunately, the net spec and fund positioning in silver was significantly vulnerable in the last (but still delayed report). Silver positioning in the Commitments of Traders for the week ending February 19th showed Managed Money traders were net long 39,384 contracts after decreasing their long position by 3,686 contracts. Non-Commercial & Non-Reportable traders were net long 75,710 contracts after decreasing their long position by 1,228 contracts.
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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.
