Gold and silver were lower overnight as the equities and the dollar were higher and Treasury yields rose. Precious metals have several long term factors in their favor, particularly the uncertain economic condition driven by the trade war with China and the prospect that major central banks will be cutting rates as threats of global recession emerge.
There are even calls for gold to eventually reach $1,800-$2,000 or higher on ideas that central banks will be forced to turn more aggressive if modest interest rate cuts fail to avert a recession. The "yield curve inversion" last week sparked the biggest recessionary talk so far, but by the end of the week the market seemed to reject some that talk after US data came in strong and the stock market recovered, and those trends continued overnight.
There may have also been some profit-taking ahead of the week's Fed symposium in Jackson Hole. Gold and silver have worked consistently higher during first half of August on an ever-expanding environment of anxiety, and the pause in that anxiety has also forced some profit-taking.
Still, gold closed higher for the 3rd week in a row after seeing a violent, $62-range week. The fact that it managed avoid more significant liquidation shows some bullish resolve.
There are concerns that Indian gold demand has not followed the recent move higher and that prices there are being discounted. Any good news on the trade front would be bearish for gold and silver, but the market could be getting jaded after all the failed hopes of the past year.
The Commitments of Traders report for the week ending August 13th showed managed money traders were net sellers of 7,114 contracts of gold, reducing their net long to 277,968. The net selling in the face of a modest increase in prices over the previous week shows a lack of engagement on the part of the funds, which be concerning to the bulls. Non-commercial & non-reportable traders combined were net buyers of 13 contracts, allowing them to hit new record long of 378,694.
In silver, managed money traders were net sellers of 11,772 contracts, reducing their net long to 37,766. Non-commercial & non-reportable traders were net sellers of 7,924, reducing their net long to 72,757. ETF interest in gold slipped on Friday, as shares in SPDR gold fell 0.88 tonnes to 843.41. They were still up 3.56 tonnes on the week.
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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.
