The initial news for gold and silver was mixed this morning with Goldman suggesting a build-up of cash due to global uncertainty will result in money flowing toward gold, but that news was somewhat offset by reports that a key gold buying day in Indian saw disappointing interest.
While the markets could have faltered this morning in the wake of news that the EU granted the UK an extension until January 31st, it is unclear what the UK political machine will do with that news. Nonetheless the gold and silver markets should continue to draft support off anticipation of the US Fed cutting rates later this week, and perhaps because of the pressure on the Dollar that is usually seen as a result of any US rate cut. While the December gold contract at the end of last week flared sharply higher and faltered off the new high for the move, the market should continue to see chart support around $1,500 level.
Both gold and silver should also see support from ongoing investment inflows into gold, silver, platinum and palladium ETF holdings. In fact, at the end of last week, gold ETF holdings reached up to the highest level since May 31st, 2013 and we have noted increased investment on breaks in gold prices.
Last Friday, gold ETF holdings increased by 115,126 ounces putting this year's total expansion to 11 million ounces (+15%)! In looking forward, expectations for this week's US scheduled data shows the prospect of slightly upbeat data, and therefore the bull camp will need help from deterioration in psychology from impeachment proceedings, a backlash for the killing of a terrorist in Syria or a reversal of Friday's trade hopes to consistently respect $1,500.
Fortunately for the bull camp, the net spec and fund in gold have come off all-time record high by 72,000 contracts which in turn could provide some fresh buying fuel this week. The October 22nd Commitments of Traders report showed Gold Managed Money traders were net long 225,930 contracts after increasing their already long position by 6,177 contracts. Non-Commercial & Non-Reportable traders were net long 328,083 contracts after increasing their already long position by 8,153 contracts.
While the silver market failed to hold all of the stellar gains posted last Friday, the sharp range up certainly puts the bear camp back on its heels to start the new trading week. Given the fact that the rally was forged on significant trading volume and open interest has risen, it would appear as if silver is getting a lift from residual safe haven interest and because of improving hopes for physical demand from improved economic expectations.
Unfortunately, the net spec and fund long in silver continues to be burdensome and the market will need very prevalent economic optimism to rally on big picture optimism as that could undermine gold. Silver saw its ETF holdings increase last Friday by 3.3 million ounces and while those holdings remain 20 million ounces off of the all-time high forged back in July 2017, silver ETF purchases this year to date have reached 101 million ounces.
The October 22nd Commitments of Traders report showed Silver Managed Money traders were net long 44,110 contracts after increasing their already long position by 2,351 contracts. Non-Commercial & Non-Reportable traders were net long 75,917 contracts after increasing their already long position by 1,759 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.
