Obviously gold prices continue to pound away on the upside with another sharp rally this morning and move above six year highs.
In addition to further geopolitical developments between the US and Iran (in the form of a supreme leader response) the gold market is also benefiting from renewed US/Chinese trade tensions following a statement from the Chinese suggesting they are being bullied and they are also the victim of current trade restrictions.
The US and Chinese leaders are still scheduled to meet on Thursday and the latest news from the White House on the upcoming talks is not to expect too much. Therefore the potential trade progress that was sparked last week is seemingly deteriorating again even if the meeting is still scheduled.
Gold has summarily discounted news that Hong Kong gold exports to mainland China in May fell by more than 50% compared to April levels. However gold is clearly benefiting from increased investor interest, very weak US scheduled data yesterday and ongoing weakness in the US dollar.
In fact investor interest in gold is given added impetus with Morgan Stanley's top commodity pick in the second half largely because of the track of the Fed. In fact Morgan Stanley projected a 50 basis point rate cut next month and raised its gold price forecast in the second half by 8% from its initial target. The bank also indicated seeing real rates close to zero again would reduce demand for US assets (dollar) and in turn that would funnel more money into gold.
As a sign of wide-ranging bullish psychology in the marketplace the gold trade is also beginning to worry about South African labor negotiations later this year. In other words the market is very sensitive to bullish items and turns a deaf ear toward bearish issues.
Total ETF holdings in gold continued to rise and stand at 55.6 million ounces and with that tally only the highest since the end of March we suspect even more investor inflows will be easy to achieve.
As we have suggested over the prior three trading sessions, traders should expect volatility in gold to continue to expand with volatility still favoring the upside directly ahead.
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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.
