Gold broke out higher overnight on a weaker dollar and some skepticism after China on Saturday criticized the latest US defense bill as "meddling," but pre-holiday trade volume was light. The defense bill provides military aid to Taiwan and offers moral support to the Hong Kong protesters.

We have continued to give the edge to the bear camp in gold, as the market has been consistently presented with the type of "risk-on" environment that in the past has typically sparked liquidation by safe-haven bulls. The bull camp appears to be holding out hope that the trade situation will, as it has in the past, be derailed before the phase one trade deal becomes official.

We also suspect that a portion of the bull camp is holding out for a derailment of the BREXIT effort, which seems to be speeding toward a conclusion. It is also possible that gold is drafting some cushion from last week's revelation that the attacks on Saudi oil facilities originated from the north, as that would seem to implicate Iran, as that could result in retaliation and a sudden flare-up in uncertainty for the global economy.

One might also take note of a slight softening of US scheduled data at the end of last week, which fosters some hope among the bull camp in gold. The February contract was able to pierce the top of a two-month consolidation pattern overnight and traded to their highest level since December 12 after consolidating for five sessions.

While the spec and fund net long position in gold has come down from this year's high of 398,000 contracts, it remains in the upper portion of the last 3 1/2 years' range, which should leave the market vulnerable if the pattern of record highs in equities and better economic data the seen ahead. Friday's Commitments of Traders report showed managed money traders were net buyers of 21,814 contracts of gold for the week ending December 17, bringing their net long to 219,268. Non-commercial & non-reportable traders combined were net buyers of 23,190, increasing their net long to 325,624. February gold achieved some bullish technical milestones overnight, and it could be on a path to test the December high today.

Silver appears to be leading gold these days, as it managed to break out on Friday and continued that move overnight. The March contract traded through the December 4 high overnight to its highest level since November 7, crossing above the 50-day moving average in the process.

Silver appears to be benefiting from classic physical commodity market conditions. The dollar was a bit weaker overnight but not very, and US equity markets seem to be finding mild support ahead of the open.

Unfortunately, the spec and fund net long in silver is also relatively high. The Commitments of Traders report showed managed money traders were net buyers of 6,617 contracts of silver for the week ending December 17, increasing their net long to 36,574. Non-commercial & non-reportable traders combined were net buyers of 9,228, bringing their net long to 72,001.

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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.