In our opinion, the gold market this morning is showing impressive action with a higher trade taking place in the face of a pair of potential major negative geopolitical developments.
Obviously, US suggestions that a deal has been reached "in principle" has the potential for being a major negative for gold as that would drain safe-haven interest from the market but a lack of confirmation of an impending deal from China has left many market participants skeptical.
Yet another safe haven draining development overnight was the landslide election victory in the UK by the Conservatives which many think will help to speed the UK to an exit.
However, the gold market is possibly deriving support from a significant gap down washout in the dollar with the dollar trading down to the lowest level since the middle of this summer.
While not a significant issue yet we have detected a pattern of gold and silver ETF selling this week and that negative psychology is given added importance following an overnight analyst recommendation for gold and silver ETF holders to purchase put protection. It should also be noted that funds have begun to flow away from mining ETFs and Hong Kong gold prices closed lower overnight.
However, the bear camp needs to be wary of pressing the short side after yesterday's high to low setback of $23, especially with February gold support fairly solid and credible at $1,463. Below that, we're watching $1,456.60 and the November low down at $1,453.10.
Another reason for the bears to be cautious is the very fickle nature of trade negotiations over the past 15 months, with the President's optimism many times misplaced.
While not a driving force in the market today, one might assume that the entrenched down-trending pattern of South African gold production will accelerate in the coming months, as their power problems are structural and seasonal weather ahead is likely to cause further problems.
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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.
