While the gold market is showing some capacity to reject prices below yesterday's spike low close in the early going today, it is difficult to call for an end to the washout.

However open interest in gold this week has already declined from 524,865 contracts to 457,650 contracts and the washout yesterday produced the most active trading volume since October 11th and that might signal a technical bottoming.

The gold market might draft some support from overnight chatter pointing out the potential for ongoing Russian central bank buying of gold as some analysts think the country is working aggressively to diversify away from its exposure to the US dollar. According to the world Gold Council the Russian central bank bought 274 tons of gold last year and that represented 40% of all central bank buying of gold and 6% of total global demand! Furthermore gold now represents 19% of Russia's foreign exchange reserves and that is the highest in 18 years.

Gold derivative holdings forged a minimal gain of 2,500 ounces on 52.4 million ounces while silver derivative holdings increased by 483,082 ounces to stand at 531 million ounces. At least in the short term it could be difficult to alter overall market sentiment, so metals bears would seem to have an edge. However we think the markets are falling because of escalating economic uncertainty and clearly they are not benefiting from safe haven conditions, which is surprising to some.

It is possible that a very significant washout in equities to end the week would rekindle flight to quality buying interest, but that could also ratchet-up deflationary selling of commodities in general, including metals. In other words gold might need a swing higher in economic sentiment to catch some short covering action or they might need a quasi-debacle in equities to ignite flight to quality buying.

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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.