As in the equity markets where "good economic news is bad for prices", positive US scheduled data yesterday was bad news for gold, silver and platinum prices. Therefore today's US GDP report could present a very significant juncture for gold prices.
In retrospect, good US data yesterday reduced the prospect of a 50 basis point US rate cut next week and provided the dollar with fresh buying interest. Given the broad based economic nature of the GDP report today any surprise result should prompt significant volatility.
After a decline in gold and silver ETF holdings earlier in the week, a decline of 80,148 ounces in gold holdings and a 1.1 million ounce decline in silver holdings yesterday could cause speculative sentiment toward the metals to soften and that in turn could increase selling today in the event of a positive US GDP reading.
Furthermore a softening of speculative inflows to gold and silver ETF's could also limit the amount of futures buying in the event of a soft GDP report. However we think the whisper number for GDP is for a slightly soft reading and an as expected or above expectation reading could result in a poor end to the trading week for gold.
In the event of a good GDP reading we suspect that silver will diverge positively with gold. With the last Gold COT positioning report posting a net spec and fund long of 313,072 contracts and the gold contract from the COT report mark off date into the July high posting additional gains of $43, the net spec and fund long in gold was probably at the highest level since September 2016.
Therefore we see risk to longs escalating today in the event prices come out of the GDP reaction lower. While we think silver will also exhibit some corrective action if gold dips early, silver has been very resilient and gains this week have been accompanied by rising open interest.
On the other hand, silver since the last positioning report into the recent high managed a rally of $1.10 and that has likely put the spec long at the highest level since February.
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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.
