The action in the gold market continues to be impressive as the February contract this morning sits $17 above the trade deal reaction low from last week despite ongoing upbeat views toward the deal and the global economy. However, a portion of the trade still expects the deal to unravel or at least for the Chinese to water-down the expectations floated by the US and therefore some safe haven bargain-hunting is probably still surfacing.
Unfortunately for the bulls, gold ETFs continue to liquidate holdings which continued a general pattern that started over the past two weeks but on the year ETF gold holdings are still up by 14%.
On the other hand, silver ETF's added 622,731 ounces to their holdings yesterday for the biggest single-day inflow since November 7th and that brings total net purchases this year up to 84.9 million ounces.
It should be noted that gold has basically discounted bearish news overnight from Russia where the government has reported November gold production to have increased by more than 12% versus 2018 and that bearish supply news was given further credence by the fact that Russian gold production in the first 11 months of 2019 expanded by 18% over the similar timeframe in 2018.
In short, gold does not appear to be tripped up by casual supply or demand headlines which suggest that longer-term investment might still be flowing to the market.
Seeing the Dollar "trend lower" appears to be adding fire to the palladium market which at times on Monday had gains in excess of $78.00 and that should help support gold and silver prices.
It should also be noted that grains also rallied aggressively, energies made new highs for the move and copper remains strong. There is fresh talk that the BOJ might be poised to provide further stimulus and therefore a measure of commodity reflation is justified.
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