With the softening of the trade tensions last week, it wasn't surprising to see both gold and silver correct aggressively especially with both markets recently building in large speculative long positioning. While economic sentiment around the globe has clearly improved, US nonfarm payrolls left the door open for economic uncertainty to remain in the game and protests in the Hong Kong have continued.
However the hope for trade progress has clearly stimulated macroeconomic optimism and prompted noted equity market strength and therefore safe haven liquidation was well-deserved. Adding into the liquidation pressure in gold and silver were comments from the US Federal Reserve Chairman late Friday who pointed to a "quite strong" labor market, especially since he went on to indicate he did not foresee or expect a US recession.
The markets should garner some positive demand orientated support from news that ETF's last Friday bought gold. Apparently ETF's added 33,583 ounces of gold to their holdings with net purchases on the year reaching 8.33 million ounces.
However silver ETF's reduced holdings by 516,467 ounces which left this year's net purchases 212.8 million ounces.
Another positive demand item was seen from news that Chinese mainland central bank holdings increased for the ninth straight month which means the People's Bank of China in August added 62.4 million ounces and that clearly suggest China is building its central bank gold reserves.
It should also be noted that Russia has continued to diversify its assets away from US holdings with gold reserves climbing 42% in the past year. Furthermore Russia is thought to have the biggest share of gold in its total reserves since 2000!
While there is talk of an increase in festival demand in India that demand source has been difficult to pin down with respect to its actual impact on world demand especially with Indian retail buyers recently showing adversity to multiyear high gold prices.
A negative supply-side development from late last week came from a 23% year-over-year increase in Tanzania gold exports. Clearly the overbought status of the precious metals markets has been moderated somewhat with the high to low slide last week of $56 in gold and $1.93 in December silver.
The COT report as of September 3rd showed the non-commercial and non-reportable combined net position in gold to be long 401,611 contracts and that was another record net long position in gold futures and options.
The COT report as of September 3rd showed the non-commercial and non-reportable combined net position in silver to be net long 93,605 contracts which are still moderately below the record spec and fund long of 118,943 contracts from back in April 2017.
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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.
