We continue to think that the gold and silver markets are vulnerable to near term declines as the overall global environment is seeing a moderating of macroeconomic uncertainty in the wake of a series of upbeat US scheduled data points.
The bear camp should continue to embrace recent news that both India and China have seen demand soften, especially in India where the trade was hopeful of a big upswing in seasonal Festival demand. In fact, the World Gold Council overnight has projected Indian gold demand to hit a three year low this year at only 700 tons versus 760 tons in the prior year.
The WGC suggested their projection was based on a 32% decline in the most recent quarterly demand figure with suggestions that high prices have discouraged gold demand in the ultra-important rural areas. Yet another negative for Indian import demand going forward is World Gold Council evidence that Indian scrap supply is rising sharply due to high prices.
While the market should draft psychological support from news of an increase in central bank holdings at the United Arab Emirates, the magnitude of that purchase was mostly insignificant. The United Arab Emirates purchased 3.04 tonnes of gold in September to bring their total holdings to only 15.4 tonnes.
In the current environment, we doubt gold and silver will throw off the downtrend pattern in place since the September high because of incremental bank purchases. In short, the bull camp needs a significant washout in the dollar, significant declines in equities, sustained upside action in energies or a fresh meltdown in either trade or Brexit negotiations to throw off the negative tilt.
Overnight gold and silver ETF's added minimally to their holdings. In the short term, gold could see liquidation in open interest and a temporary slide back below $1,500. Similarly, the silver market could also see liquidation of open interest and a return back toward consolidation low support down at $17.78.
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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.
