The gold market starts the new trading week out on a negative technical footing following a damaging reversal last Friday. In our opinion the market is suffering from a temporary lull in key geopolitical headline flow with some traders suggesting expectations for easing from this week's FOMC meeting are overstated in the wake of last week strong US retail sales result.

Apparently the gold trade is discounting talk that India could be poised to reduce its gold import tax. However the call to reduce the Indian gold import tax came from the World Gold Council and not from Indian officials. On the other hand the justifications for the increase in the gold import tax back in 2013 have been largely reversed and there were discussions of reducing the tax around the recent election.

While the gold market is showing action that might be construed as a blow off "top", the market continues to have a long list of unrelated supportive themes just below the surface. However, the primary bull focus this week will likely settle on the US Federal Reserve meeting on Wednesday afternoon.

In our opinion, expecting the Fed to announce a rate cut is highly unlikely given their desire to show steadiness but also because economic slowing hasn't reached overly concerning levels yet. In fact, last week's US retail sales reading shifted the needle back toward an "on hold" stance and that reading also sparked the start of corrective setback in gold prices.

While the situation in the Gulf of Oman has not presented fresh concerning headlines that situation remains in the background with the international community divided on whether or not Iran was directly involved in the recent attacks.

While we doubt the situation in Hong Kong will provide significant support to gold prices today, protests have continued but were not violent in nature.

While the spec long position in gold has continued to climb during the May and June rally, we don't see the positioning excessively overbought until it surpasses 250,000 contracts. The Commitments of Traders report for the week ending June 11th showed Gold Managed Money traders net bought 38,803 contracts and are now net long 156,718 contracts. Non-Commercial & Non-Reportable traders were net long 224,405 contracts after increasing their already long position by 31,710 contracts.

The June 11th Commitments of Traders report showed Silver Managed Money traders reduced their net short position by 11,386 contracts to a net short 8,545 contracts. Non-Commercial & Non-Reportable traders added 12,289 contracts to their already long position and are now net long 23,635.

Like the gold market, the silver market also showed signs of technical topping with the big range up reversal at the end of last week. Given that silver periodically tracks physical commodity fundamentals, we see it to be more vulnerable than gold in the near term. Fortunately for the bull camp, the net spec and fund long in silver is very small and therefore declines in prices off long liquidation might be limited to the June low at $14.70.

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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.