The gold market has faltered at the end of this week at the same time that the silver market has continued to perform impressively. Obviously another risk-on day has prompted long liquidation in gold which more than likely continues to hold a massive net spec and fund long positioning!
Therefore we must continue to reiterate the potential for aggressive stop loss selling in the event that the latest round of tariffs are delayed from news in today's trading session. In fact adjusted into this week's high the net spec and fund long in gold (futures and options combined) probably reached above 400,000 contracts for the first time ever.
Even more discouraging for the bull camp is the fact that gold has failed to benefit from positive overnight fundamental news. In addition to gold ETF's seeing a 3rd straight day of inflows (+49,478 ounces) the market also failed to respond to fresh news of central bank buying.
Apparently India stepped up and raised its holdings by 9.2% in the year ending in June and that was the biggest addition for the Indian Central bank in over 10 years. The markets also saw reports of gold reserve buying by Russia, China and Kazakhstan.
On the other hand the silver market continues to perform impressively and in turn is clearly outperforming the gold market. While the net spec and fund long in silver has probably built up further this week, we think the net spec and fund long remains modestly below record high levels and that should allow for further buying capacity.
In fact in the current condition the silver market appears to be a better alternative for the bull camp than gold as it is a hybrid of safe haven and physical commodity capable of benefiting from anxiety or the hope for improved economic conditions.
In conclusion, today could be a day where gold and silver see very significant divergence! However, given the correction from this week's highs in gold, one could suggest that the trade has already factored in some potential for a delay in US tariffs (scheduled to be implemented this weekend) and the lack of an official announcement of a delay during today's trade could prompt traders to buy back in for a resumption of trade tensions next 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.
