While the gold market showed some recovery action last week after an aggressive four day washout, the bear camp looks to generally retain control. First and foremost, the track in the dollar generally looks to remain up despite disappointing data and repeated dovish Fed mumblings.
As we indicated a number of times last week, we think gold, silver and platinum might become industrial/physical demand focused markets, not financial safe haven instruments. However, better than expected Chinese economic data over the weekend and higher global equities has not resulted in strength in gold and silver early this morning and that partially defeats the physical demand angle.
However, the market was presented with bullish supply and demand forecast figures released in the press overnight with a private entity predicting gold demand this year will reach the highest levels in four years.
Fortunately for the bull camp, the net spec long positioning in gold was very modest and clearly overstated given that prices following the report declined by $29 from the COT report mark off. The Commitments of Traders report for the week ending March 26th showed Gold Managed Money traders added 22,011 contracts to their already long position and are now net long 79,757. Non-Commercial & Non-Reportable traders net bought 28,242 contracts and are now net long 170,148 contracts.
Like the gold market, the silver market severely damaged its charts but has in retrospect showed some potential value at the $15.00 level. With the silver market not showing open interest liquidation last week, (on the break down) that casts some doubt the argument that last week's washout has balanced the charts. However, following the COT positioning report, May silver fell an additional $0.47 and the $15.00 level has been a key pivot point for the market on a very consistent basis since last August!
However, we see silver as a classic industrial/physical demand focused market and therefore a measure of positive correlation to equities is likely this week. The March 26th Commitments of Traders report showed Silver Managed Money traders added 2,267 contracts to their already long position and are now net long 12,261. Non-Commercial & Non-Reportable traders are net long 49,000 contracts after net buying 5,558 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.
