Despite harsh commentary from China overnight regarding the US charge of currency manipulation, the gold market has started off on a slight corrective track. Certainly a slightly higher US dollar and bargain-hunting buying in equities has created an environment with lower safe haven interest than was present yesterday.
However seeing the People's Bank of China cushion the yuan's decline today has further brought down overall anxiety today. On the other hand at least one major fund manager has suggested the gold market is not bought out from typical speculative positioning and others have touted near term upside targeting in gold above the $1500 level.
Investors have also continued to push money toward gold with ETF inflows posting a 6th straight gain yesterday bringing this year's net purchases to 5.3 million ounces. Unfortunately for silver bulls silver ETF holdings were reduced by 142,661 ounces but silver ETF's have still gained 74.6 million ounces year to date.
In addition to a slight calming of international anxiety, the gold market is also seeing some pressure from press coverage of gold hitting new all-time highs in terms of the British Pound, Japanese Yen, Canadian dollar and Australian dollars. However more importantly is the fact that gold prices hit new highs in India with jewelry prices particularly frothy.
While the early action today appears to be a normal corrective back and fill trade, traders should monitor the action in the dollar as it has seemingly rejected a critical chart point of 97.00 overnight and might have found temporary support. Certainly the 800 point loss in the Dow from yesterday is not expected to be erased today but a minor pause in high anxiety provides an environment for some choppy to lower two-sided trade in gold.
In fact given that the central bank in China did try to cushion its currency overnight, should reduce the odds of a harsh tweet from the White House today.
Not surprisingly the silver market is also showing some back and fill action today but it is not as overbought as gold and could be partially cushion by a moderating of economic anxiety. However silver continues to extend a pattern of lower highs and adjusted for the high yesterday, it is likely that the silver market has the largest spec long positioning since May 2017! Therefore traders should not be surprised to see silver fluctuate in a wide range bound by $16.50 on the upside and $16.00 on the downside.
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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.
