We see August gold to be vulnerable to a downside breakout below critical support at $1384.70 with the dollar breaking out up early and the market seemingly expecting this week's Fed testimony to present less dovish prospects for the month end meeting.
However the market should garner some support from news that hedge fund managers increased their net holdings of gold derivative to the highest levels in 21 months. On the other hand the net spec and fund long positioning in gold futures and options has also reached the highest level since September 2016 and that could leave the market vulnerable to moderately aggressive stop loss selling if chart support levels are violated this morning.
Gold positioning in the Commitments of Traders for the week ending July 2nd showed Managed Money traders were net long 241,163 contracts after increasing their already long position by 11,499 contracts. Non-Commercial & Non-Reportable traders are net long 324,758 contracts after net buying 21,849 contracts.
Certainly a pattern of central bank buying is a longer-term underpin for gold but in the short term the ebb and flow of US rate cut expectations are likely to dominate. Therefore today's sweep of scheduled data (most specifically the job openings report for May) will take on added importance with the report expected to show a slight notch higher.
We see a $1350 August trade before we see a $1425 August gold trade.
Silver ETF holdings increased by 2.03 million ounces yesterday, bringing this year's total purchases to 19.7 million ounces. Fortunately for the bull camp in silver the net spec and fund long is in the lower half of the last two years positioning range and therefore a silver liquidation brought on by gold might be less severe.
Silver positioning in the Commitments of Traders for the week ending July 2nd showed Managed Money traders reduced their net long position by 1,710 contracts to a net long 21,762 contracts. Non-Commercial & Non-Reportable traders are net long 50,992 contracts after net selling 2,153 contracts.
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