While the gold market could have been supported overnight by the definitive pro-democracy election win in Hong Kong, the gold market instead is faced with at least three key negatives to start the new trading week.
Clearly, the risk on vibe flowing from equities as a result of Chinese newspaper suggestions of a close at hand trade deal is cause for a weak start in gold and silver but the market is also pressured as a result of news that Chinese gold imports in October fell to the lowest level in at least three years.
While not a major negative for gold to start the trading week, strength in the dollar is beginning to emerge as a problem for the bulls, with the dollar today poised to breakout to the highest level since November 14th. It would appear as if the marketplace is favoring a positive trade outcome in the form a small deal and that has served to thicken resistance in December gold at $1,475.80 and at $17.11 in December silver.
In short, the track of initial news on trade and demand has resulted in some weak handed longs moving to the sidelines this morning.
In fact, with President Trump suggesting he will consider a veto of the Hong Kong legislation that would seem to increase the potential for a small trade deal this week. In the current condition the gold market probably wouldn't even be able to rise significantly in the face of fresh news of physical demand from India, China, the IMF or the World Gold Council, but we think the bull camp now needs help from that quadrant just to stand up to the potential liquidation from safe haven if anything positive on trade is seen directly ahead.
Last Friday gold saw an inflow of 38,037 ounces into ETF holdings while silver ETF's reduced their holdings by 1.15 million ounces. Unfortunately, the net spec and fund long in gold remain problematic for the bulls and are in the very upper tier of the speculative long positioning range since early 2016!
The November 19th Commitments of Traders report showed Gold Managed Money traders net-long 225,688 contracts after net buying 25,376 contracts. Non-Commercial & Non-Reportable traders added 30,788 contracts to their already long position and are now net long 335,411.
At least to start the new trading week we leave the bear camp with an edge in both gold and silver.
The November 19th Commitments of Traders report showed Silver Managed Money traders net bought 8,092 contracts and are now net long 40,716 contracts. Non-Commercial & Non-Reportable traders added 5,870 contracts to their already long position and are now net long 69,832.
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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.
