The path of least resistance is pointing upward in gold with a fresh four day high on the charts and yet another geopolitical flashpoint added to the equation from the Iranian response to the end of waivers.
Adding into the tensions and to the safe haven allure of gold (and to a lesser degree silver) is the fact that Russian officials have suggested the Iranian move to exit portions of the deal is the result of "irresponsible action from Washington". Specific "irresponsible" actions from the US include reinstated sanctions, the branding of the Revolutionary guard as a terrorist organization and the deployment of US ships and bombers within striking distance of Iran.
Other modestly positive developments over the last 24 hours included evidence that the People's Bank of China increased gold holdings by 57 tons since December and a very minor increase in gold ETF holdings. Citigroup has indicated that Chinese Central bank gold purchases this year could reach 700 tons which would surpass last year's 48 year high!
Another supportive development that didn't get much headline interest this week is news that Russia has reduced dollar holdings in its reserves by half, as that should lead to the conclusion that Russia might be channeling more money into gold.
However some traders are suggesting that the dollar is likely to garner more safe haven interest than gold and that is somewhat borne out by action earlier this week. Not surprisingly, a number of physical commodity markets like gold have recently encountered their 200 day moving averages and that suggests a critical pivot/junction for many markets into the self-imposed Friday deadline for progress on the trade situation.
In our opinion the gold market has not benefited enough yet from recent bullish World Gold Council demand figures and the market also hasn't shown that much strength off noted increased anxiety in the Middle East.
In conclusion, we favor the bull tilt and will continue to favor that opinion until the tide of psychology shifts back toward the potential for a trade deal and equities confirm that shift with a noted risk-on recovery.
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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.
