While the gold market has shown some positive early action from the flare up of US/Chinese trade relations, it is being held back slightly by strength in the dollar. Apparently the President has indicated he will raise tariffs on $200 billion worth of goods to 25% from 10% starting this Friday.
It would also appear as if safe haven is being stoked by movement of US warships in the disputed areas off China and perhaps more importantly to gold the US is apparently moving a carrier "Strike force" toward Iran to supposedly enforce sanctions.
While the gold trade basically discounted extremely bullish news from the World Gold Council last week, that news should provide underlying support to prices going forward. In fact, strength in global demand, expanded central bank gold purchasing, Indian demand growth and growth in Chinese demand from the report basically hits all of the primary bullish buttons for from the demand side of the equation.
From a technical perspective, the net spec and fund long has been reduced to a moderately low level and is probably overstated given the downside action late last week. Gold positioning in the Commitments of Traders for the week ending April 30th showed Managed Money traders went from a net short to a net long position of 10,440 contracts after net buying 32,768 contracts. Non-Commercial & Non-Reportable traders are net long 93,682 contracts after net buying 35,921 contracts.
Given the definitive reversal in silver prices at the end of last week, it would appear that the market has seen some revival of physical demand hopes in the wake of positive US jobs data perhaps from the idea that the US economy will pull the global economy forward and in turn improve physical consumption of silver.
In fact it should be noted that Silver ETF's last Friday added 2.79 million ounces to their holdings and that was the biggest one day increase in holdings since February 14th.
Like the gold market, the net spec and fund long in the silver market has been brought down to moderately low levels especially given that prices into last week's lows were down an additional $0.41 leading us to conclude that the long positioning is reaching what we call a "mostly liquidated" standing.
The April 30th Commitments of Traders report showed Silver Managed Money traders are net short 14,254 contracts after net buying 3,616 contracts. Non-Commercial & Non-Reportable traders net bought 2,072 contracts and are now net long 19,839 contracts.
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