The general attitude regarding the trade deal appears to have turned more pessimistic since Friday, and yet gold was modestly weaker overnight. One factor being cited is that the Chinese yuan is lower, which has the effect of raising the price of gold for the Chinese consumer, thereby causing concerns about physical demand.
Investment interest has apparently waned as well, as holdings in the largest gold ETF fell 0.9% on Friday. Gold bulls were probably disappointed that the precious metals did not show more strength last week given the general weakness in the dollar.
One could argue that these developments are more bullish than not for gold and silver, but the metals would need to draw safe-haven support away from the dollar. Recent reports of central bank buying by China and Russia and declining South African production have offered some classic bullish fundamental support, but those have been undermined by concerns about the Chinese currency.
The dollar bounced off its lows on Friday but still closed lower on the day and was choppy overnight. We probably need to see a sustained move below 97.00 in the June Dollar Index to spark a breakout to the upside in gold. July silver pushed lower overnight and appears to be on course to test the May lows.
Friday's Commitments of Traders report showed managed money traders were net buyers of 9,281 contracts of gold for the week ending May 7th, bringing their net long to 19,721. Non-commercial & non-reportable traders added combined were net buyers of 6,754, bringing their net long to 100,436.
The buying trend is supportive, and these traders are far from being in overbought positons. In silver, managed money traders were net sellers of 639 contracts, increasing their net short to 14,893. Non-commercial & non-reportable traders combined were net sellers of 4,874, reducing their net long to 14,965. The selling trend is short term negative, which is at odds with the trend in gold.
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