As we expected, gold and to a lesser degree silver came under pressure following the "fact" of the US rate cut. Adding to the downward pressure in gold prices is the take away that the Fed will not be quickly enticed into another reduction.
Yet another significant pressure on gold and other safe haven instruments is the realization that retaliation against Iran is apparently taking the form of fresh sanctions instead of military action. In fact yesterday the US President indicated sanctions would be announced soon with the White House yesterday surprisingly taking the high road/calm track in the handling of the attack of Saudi Arabia.
In short, unless the Saudi government decides to launch a military strike unilaterally, a major safe haven event doesn't appear to be likely in the coming days.
So far, the gold market has not drafted detectable support from the ongoing volatility in the US repo rate but that could change in the event that the Fed injection today fails to end the upward bias in the Feds Fund rate. The Fed yesterday discounted the surprising jump in repo rates this week as an aberration and indicated they would not allow the situation to undermine market sentiment.
While gold might have seen some pressure earlier in the week from a series of better than expected US economic reports, expectations for today's reports could be more supportive as analyst expect all of today's readings will depict weakness.
Earlier this week, we thought gold was vulnerable to a significant correction after the Fed but ongoing respect of consolidation low support above $1,492.10 and narrow ranges reduces our downside projections. In the end, the subject of trade relations, the Middle East situation and lower US interest rates leave a number of bullish forces underpinning gold prices.
Unfortunately, the silver market looks to remain vulnerable due to negative charts, bearish spillover from gold and from a lack of bullish sensitivity to good US data.
Yesterday gold ETF's purchased 154,956 ounces of gold bringing this year's net purchases up to 8.1 million ounces. Unfortunately for silver longs silver ETF's reduced their holdings by 403,858 Troy ounces which extends a pattern of liquidation.
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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.
