With two of three Fed members yesterday leaning in favor of cutting rates and the Fed Chairman walking a neutral line with suggestions the economic outlook is still favorable, the Fed might be contributing to the slightly higher gold trade this morning.
Gold and silver should also be benefitting from a minimal setback in the dollar and ongoing favorable demand news from the ETF sector. In fact gold ETF's have now seen inflows for 17 days in a row which is apparently the longest streak since the subprime crisis. While some measures already have gold ETF holdings at record high levels (there are differences among what instruments are being included) the trend of investment is very clear.
Apparently the World Gold Council continues to trumpet the fact that gold ETF holdings in September reached new all-time highs of 2,808 tonnes after a monthly jump of 75.2 tonnes while Bloomberg measures seem to suggest that ETF's must expand another 35 tons to reach a new record.
According to Citi gold could now rally to $1700 as economic slowing should push money from other markets into gold. In our opinion traders should be prepared for a breakdown in trade talks as harsh commentary from both sides early this week appears to have polluted the air and Chinese negotiators are high enough in the hierarchy to walk out if they view US tactics as insulting.
Gold might find support from a 10 day Indian festival that starts today, especially as that will be followed by the Diwali festival of light where interest in buying gold for traditional gift giving should prompt some buyers to look beyond high prices.
From the technical perspective, the slide from last week's high was forged on falling trading volume and a minor contraction in open interest and that could suggest a lack of broad-based interest in the short side.
The silver charts this morning look more bullish than the gold charts with the market forging a nine day high and retesting the psychological $18.00 level. It should be noted that silver ETF holdings increased for the third straight day with year to date purchases now at 105.7 million ounces. Support and a pivot point in December silver moves up to a series of closes around $17.70.
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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.
