While August gold has not forged a fresh higher high for the move early it has returned to the vicinity of the highs and has spent the entire trade in positive territory.
The gold market is certainly lifted by ongoing weakness in the dollar which plumbed a new low and fell down to the lowest level since March 26th early today. Gold is being assisted by fresh bullish forecasts for gold from Black Rock fund managers who pointing to the potential longer-term support for gold from a dovish Fed.
With the US expected to apply fresh sanctions on Iran it is possible the markets could see a response from Iran capable of driving gold into new highs early this week.
In another a sign of growing speculative interest in gold, ETF's at the end of last week bought 1.03 million ounces of gold for the single largest single day purchase in 12 months. ETF inflows also posted the eighth straight day of gains and net purchases this year are now 2.63 million ounces.
It should also be noted that silver ETF's added 931,541 ounces to their holdings on Friday bringing the cumulative purchases this year to 3.49 million ounces.
Another potentially major bullish fundamental story circulating in the marketplace hints at the importance of China slowing its US treasury purchases and in turn increasing central bank gold purchases.
The story is even more powerful by the argument that the Chinese maneuver is being mirrored by a number of other central banks. According to the world Gold Council central banks bought 145.5 tons of gold in the first quarter which was the fastest pace since 2013.
After basically ignoring/discounting the dollar in determining daily price action on a number of occasions over the last two months, it is possible that ongoing declines in the dollar this week will take over as the primary bullish fundamental.
In our opinion, gold's most impressive reaction last week came with its ability to remain positive in the face of a sudden return to global economic optimism following headlines of trade progress. However, given the massive pulse up move last week, we suspect gold will need ongoing exchanges between Iran and the US to maintain prices consistently above $1,400. T
he Commitments of Traders report for the week ending June 18th showed Gold Managed Money traders added 32,963 contracts to their already long position and are now net long 189,681. Non-Commercial & Non-Reportable traders were net long 255,598 contracts after increasing their already long position by 31,193 contracts.
In our opinion, the silver market needs further risk on economic optimism and strength in gold to extend toward the next resistance point of $15.75 and that could be a difficult combination. The June 18th Commitments of Traders report showed Silver Managed Money traders net bought 13,293 contracts which moved them from a net short to a net long position of 4,748 contracts. Non-Commercial & Non-Reportable traders were net long 34,164 contracts after increasing their already long position by 10,529 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.
