Obviously the gold market is under a liquidation rout because of the decision to restart US/Chinese trade talks over the weekend. Adding into the liquidation pressure is the fact that the dollar has forged a six day high and saw a lot of its mid-June selling off fears that the trade issue would pull down the US economy.
Another element feeding into the liquidation action and could accentuate the selling directly ahead is the fact that the most recent positioning report showed an extensively overbought market. The most recent positioning report in gold showed a net long of 302,000 contracts which effectively puts the spec long at the highest level since the third quarter of 2016!
It should also be noted that open interest in gold reached 321,953 contracts, and the violent new high for the move reversal on June 25th saw trading volume of 577,605 contracts in what now appears to be a blow off top. Therefore, the market is vulnerable to more classic stop loss selling particularly if it appears that the August contract is poised to close below the psychological retracement level at $1,383.
While we doubt the President's visit to the Korean demilitarized zone is a major cause to extract safe haven premium from gold, the situation might push some additional longs to the sidelines early this week.
The Commitments of Traders report for the week ending June 25th showed Gold Managed Money traders added 39,983 contracts to their already long position and are now net long 229,664. Non-Commercial & Non-Reportable traders added 47,311 contracts to their already long position and are now net long 302,909.
Unlike the gold market, the net spec and fund long in silver is minimal and therefore silver might not be facing as much stop loss selling pressure. On the other hand, the 200 day moving average in September silver was temporarily violated overnight and that average will be a critical pivot point today at $15.20.
The Commitments of Traders report for the week ending June 25th showed Silver Managed Money traders added 18,724 contracts to their already long position and are now net long 23,472. Non-Commercial & Non-Reportable traders net bought 18,981 contracts and are now net long 53,145 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.
