As is sometimes the case the gold and silver markets came away from a key event with a significant reversal action. Apparently metals traders/investors were pent-up for an aggressively supportive US Fed, as the widely touted 25 basis point rate cut ultimately set the stage for a sharp wave of stop loss selling.

Some market participants have indicated the Fed was less dovish on their promises and Outlook and that effectively punctured the bullish vibe in gold and silver. Unfortunately for the bull camp a consequence of the Fed's less dovish than expected stance has been a significant upside extension of the dollar which overnight reached up to the highest level since May 2017!

While the overnight decline in gold ETF holdings was not significant the recent pattern of outflows adds to the idea that the May through early July gold rally has either paused or ended. While Citi Group maintained its bullish view toward gold after the Fed disappointment yesterday, the market probably sees added pressure from news that gold recycling in India surged to a seven year high because high prices stimulated supply flow.

While the bear camp looks to hold the edge today writing off the "bull trend" is premature as the World Gold Council continues to tout expanded global gold demand in quarterly figures with the overall expansion of world demand pegged at 8% in the April through June timeframe.

The market also saw increased demand in India and the ever present evidence of a pattern of central bank gold buying. In the first six months of this year central banks added 374.1 tons with steady additions by Russia and China with Poland leading the pack with a significant purchase.

Furthermore the Fed Chairman did suggest they were embarking on a 1990s style mini easing cycle! However the last COT positioning report in gold showed a lofty net spec and fund long of 318,000 contracts and that reading was close to the largest net long since the latter half of 2016 and therefore stop loss selling should have some follow-through.

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