In the early going today gold prices are waffling around both sides of unchanged as it would not appear that economic and political anxiety was notably stoked by headlines over the past 12 hours. In retrospect we suggest that the magnitude of the gains in the gold market yesterday were somewhat disappointing given the 800 point decline in the Dow and an avalanche of dire forecast for the US economy.
However money continued to flow into gold and silver ETF's yesterday with the net purchases of gold ETF's for this year at 6.33 million ounces and the net year to date purchases of silver reaching 77.4 million ounces. Therefore investors continue to push money toward gold and silver in a flight to quality move and it should be difficult to completely eliminate economic slowing concerns without an improvement in trade relations or a series of strong US data points.
While economic anxiety might be soothed in the event of a distinct Fed attempt to provide confidence in the form of dovish promises that shouldn't be a panacea. However the inverted yield curve and record low yields (in certain treasury instruments) has finally taken place and that storyline might now lose some of its capacity to lift gold and spur market fears.
While the gold and silver markets have not been held back by this week's rally in the dollar seeing the dollar climb above 98.00 could foment some currency related long profit-taking. However the collection of economic and geopolitical concerns remains intact, investment is flowing in and the Hong Kong government implemented a massive stimulus program in a sign that some central banks are starting to react to the economic condition.
Furthermore another large financial firm has increased its gold price projections and other headlines this morning are suggesting hedge funds think bonds are so expensive now that gold is a better alternative.
Perhaps the most limiting fundamental development so far this week came from news that China has restricted imports of gold since May with reports that no import quotas are being issued and one has to assume that is in some way related to the trade war and the impact on the Chinese currency.
The bull camp remains in control, but traders should be aware of increased volatility, especially considering that the recent COT spec and fund reading in gold was already at a record net long and since then prices rallied $62 into the high since that data was collected!
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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.
