Just when it appeared as if the gold bull market was set to falter, bullish forces have returned in force with the presence of a "Fed put" providing the most significant buying impetus. With the added impact from the dovish Fed stance a reversal down in the dollar, it is likely that two fundamental forces are poised to lift gold back toward the highs seen last week.
In fact, the Fed was definitively more dovish than anticipated and the odds of additional cuts beyond the widely anticipated August 1st cut have been expanded. Furthermore, given the wide-ranging comments from the US Federal Reserve Chairman yesterday regarding the global economy, one could suggest gold will also see economic uncertainty buying ahead.
While the markets did not expect the Federal Reserve Chairman to give any credence to the potential for the US to return to the "gold standard", that potential was all but eliminated by the testimony yesterday. In looking ahead, it is possible that any soft US scheduled data readings could fan talk of a 50 basis point rate cut, but to solidify the bull's case might require a consistent trade in August gold above the $1,400 level.
Another bullish focus for the trade came from the World Gold Council which has pointed to even stronger gold investment demand prospects in the next 6 to 12 months as a major bullish force capable of lifting gold prices and that projection is given significant credence by the fact that investors added to gold ETF holdings again yesterday bringing this year's net purchases up to 3.25 million ounces.
So far this year gold holdings by ETF's have risen 4.6% and have reached the highest levels in 12 months.
Even the silver market is experiencing bullish headline flow with the ETF markets adding to silver ETF holdings for three straight days and the September silver contract closing above its 200 day moving average yesterday.
We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.
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.
