While we think the downside reaction in gold and silver pricing yesterday was an overreaction to the perception of reduced economic uncertainty (because of US home sales gains) the markets were carrying a moderately large spec long positioning and some balancing was in order.
Supporting gold prices this morning is news that Hong Kong August gold exports to mainland China surged by more than 60% above the volumes seen in July. Furthermore inflow to gold ETF's surged in the face of yesterday's a sharp drop in prices and that suggests investors are committed and capable of adding more holdings.
In fact market sources are projecting that total gold holdings worldwide will return to the record level set in 2012 soon. Yesterday gold ETF's saw an inflow of 712,894 ounces bringing this year's net purchases 29.8 million ounces. The inflow yesterday was the largest since June 21st and the eighth straight day of inflows.
Silver ETF's also gained 2.53 million ounces and that was the biggest one day inflow since August 23rd. In yet another bullish indication gold open interest on Tuesday posted a new all-time record level but that surge might also have been partially responsible for the volatile corrective action yesterday.
While the gold market has not drafted much in the way of support from the impeachment issue seeing Mitt Romney categorize the transcript of the telephone conversation with the Ukrainian president as deeply troubling, suggests the impeachment issue could become a major issue for the US economy and therefore for the gold market.
However the gold market might see some headwinds from the US dollar which overnight broke out to the upside again and reached the highest level since September 3rd.
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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.
