While some equity markets in Asia were tracking higher the brunt of the markets overnight showed their doubt for the latest US/Chinese trade deal by tracking lower. Apparently they lack of detail on the specifics of the deal and the lack of broad reaching change in the core issues has most markets concerned of further slowing.
Therefore the gold market has started out stronger and regained the $1500 level lending that area more credence as some form of value. Holding back the gold market this morning were negative gold demand forecast floated in the Asian markets following the disappointing Chinese import/export data.
In fact a forecast overnight predicted slowing in China would result in a 4% decline in gold jewelry consumption, with a decline of 20% possible from the gold investment demand quadrant. However the gold and silver markets this morning clearly think rising demand from safe haven is more than capable of offsetting fears of declines in classic physical demand.
In fact a number of economists suggest the deal is merely a pause in the tensions instead of the beginning of a solution.
Unfortunately for the bull camp, the gold market continues to hold a significant net spec and fund long positioning and that should leave the market vulnerable to further stop loss selling if prices fall back toward last Friday's lows. Granted the latest net long reading is understated given the markets post report slide of $25 but until the net spec and fund long is below 300,000 contracts, we see lingering stop loss selling capacity.
Some will suggest that gold prices needed to contract in order to stimulate seasonal/festival buying of gold in India, as retail outlets have been pointing to high prices as the cause of soft sales. In the end, one has to wonder if gold prices $150 off the high will be enough to stimulate Indian buying as prices are still generally near all-time highs!
Apparently gold ETF saw a 20th straight day of inflows with an addition of 80,650 ounces last Friday. It should also be noted that silver ETF holdings increased by 3.1 million ounces last week bringing their net purchases this year to 108 million ounces.
Gold positioning in the Commitments of Traders for the week ending October 8th showed Managed Money traders net bought 14,458 contracts and are now net long 249,632 contracts. Non-Commercial & Non-Reportable traders are net long 353,301 contracts after net buying 15,872 contracts.
While the silver market did not damage its charts as severely as the gold market at the end of last week the charts generally favor the bear camp until prices regain $17.78. The October 8th Commitments of Traders report showed Silver Managed Money traders added 2,228 contracts to their already long position and are now net long 47,492. Non-Commercial & Non-Reportable traders were net long 81,797 contracts after increasing their already long position by 4,453 contracts.
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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.
