Talk of a trade deal has boosted risk appetites and pulled safe haven support from the metals in recent days, but gold and silver are clearly oversold after enduring their biggest declines in months.
China lowered its growth rate target for this year overnight, but any damage to global equity prices were fleeting, as they quickly recovered. It does seem that the market is in danger of overplaying the trade deal rhetoric, especially if the signing date is still 22 days off. Yesterday it was reported that a trade agreement could be signed by March 27th, and that China would lower tariffs on US made goods, including agricultural products, chemicals and cars in exchange for sanctions relief.
There was some supportive news for gold from the demand side of the equation yesterday, with reports by the IMF that China increased their gold holdings by 11.82 tonnes to 1,864.39 in January and India increased theirs by 6.53 tonnes to 606.99. But there was some bearish production news as well, with reports that Russian gold production increased 4% in 2018 to 331.783 tonnes and that silver production was up 5% to 1,652 tonnes.
It was also reported that Australia's gold production hit an all-time high of 317 tonnes in 2018, breaking the previous record of 314.5 tonnes that had stood for 21 years.
Holdings in the world's largest gold ETF fell 0.8% on Monday after falling 1.5% on Friday. Friday's was the biggest percentage decline since December 2016. Holdings have declined 3.5% or 27.9 million tonnes since February 20th.
The rally in the equities could be getting a bit long in the tooth, and the E-mini S&P's outside day on Monday after opening at a new high for the move could be an indicator of a top. If it leads to a more substantial setback in upcoming sessions, it could lend support to gold and silver. Like gold, silver was weaker on Monday on follow-through from Friday's selloffs. The lack of "safe haven" needs is pressuring the market.
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