From a short-term perspective, the gold market may have found a temporary reprieve as the pendulum on trade talks appears to have shifted slightly back away from progress. In other words, headlines suggesting China's request to roll back tariffs might be a firm demand could derail talks unless those demands are accompanied by notable Chinese concessions. Without Chinese concessions, we highly doubt President Trump will consider a rollback.
It is also possible that gold and silver have found modest temporary chart support at recent consolidation lows, with gold this morning showing a reflexive bounce from yesterday's concentrated selling event. Unfortunately for the bulls recent negative demand stories from India and China have been followed up by a story overnight suggesting that global jewelry demand is declining in what could be a shift away from historical interests.
Certainly high prices have played a role in a 16% year-over-year global jewelry demand quarterly decline but when one considers consumers have been strong in several key global economies, the decline in gold jewelry demand is troubling for the bull camp.
In a positive development, it should be noted that gold ETFs increased their holdings for 5th straight session with some measures pegging holdings to be at the highest levels since 2013. In fact, seeing gold ETFs continue to attract investment in the face of a three day high to low setback of $39 suggests investors are not as discouraged as cash and futures traders.
While definitive pressure today from risk on liquidation is largely absent early on, bearish news from the World Gold Council following forecasts of a 32% decline in third-quarter gold demand, leaves the fundamental bias pointing downward. The world Gold Council indicated that softer demand was likely the result of high prices. Indian gold demand did decline to three-year lows with projections of total Indian gold demand this year to be only 700 tons relative to historical Indian gold demand readings of 800 to 1000 tons.
It should be noted that silver ETFs sold 472,148 ounces which pulled year to date purchases below the 100 million ounce level. While there might be initial signs of respecting support both gold and silver in the early going today did "re-damage" their charts in the overnight trade.
In the near term, gold prices might find temporary support at consolidation low levels around $1,478 and then again down at $1,470.50 but it could take an actual derailment of trade talks to result in a sudden reversal of the washout pattern.
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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.
