Hope springs eternal for progress on trade and that sentiment was given further fuel by media reports of a top-level conference call over the weekend. Therefore it is not surprising to see US equities poised for more new all-time high prices this morning which in turn facilitates safe-haven sell in gold.
With the charts in the gold suffering some damage with a three day low early today it is clear that the Chinese short-term interest rate cut overnight is of little help to the bull camp. While the markets were presented with a surprise positive Indian gold demand reading last week, the trade this morning is confronted with headlines touting last week's outflow from gold holdings as the largest outflow since December 2016!
On Friday, gold ETFs reduced their holdings slightly for the eighth straight day with silver holdings also reduced by 1.37 million ounces for their sixth straight day of declines. While the gold market showed some recovery action last week, a reversal from that week's highs and a retrenchment of $25 certainly suggests the bear camp retains overall control.
In fact, one could suggest that last week's attempt to rally highlights the market's myopic focus on "risk-off" uncertainty from the trade talks and therefore it is not surprising to see trade hopes facilitate more downside. While it is extremely difficult to predict the next turn in the trade talks, news last week that China ended a ban on US poultry imports and could be poised to purchase US meat because of the raging hog disease could result in the agricultural purchases quota being met.
Therefore, the bull camp has to be nervous about what the trade situation will bring this week with any further signs of progress potentially throwing December gold down to $1,450.
While the precious metals have not paid that much attention to the events in Hong Kong, reports of mainland Chinese troops deploying on the island would seem to bring about the potential for an "end game".
While the charts in gold favor the bear camp with the reversal last week and the appearance of a market destined to return to consolidation support down at $1,448.80, the market did reduce its vulnerability with last week's position changes.
In fact, the net spec and fund long positions were reduced by 36,930 contracts as of November 12th to stand at 304,623 contracts long.
The Commitments of Traders report for the week ending November 12th showed Silver Managed Money traders net sold 9,878 contracts and are now net long 32,624 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 15,440 contracts to a net long 63,962 contracts.
Like gold, the silver market also moved to reduce the magnitude of its net spec long positioning and that could serve to cushion silver in the event of a wholesale risk on liquidation type week.
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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.
