While the February gold contract enters the Tuesday trade near the Monday gap up closing level, prices overnight initially fell deep into that gap but did not close the gap. The gap would be closed with a trade down to $1556.60 with the initial low this morning seen at $1557.00.
Underpinning gold prices are suggestions from Iran's National Security Council that they are assessing 13 retaliation scenarios against the US, with even the weakest retaliation resulting in a historic nightmare for the US!
Massive attendance at the funeral of the Iranian military leader has extended anxiety from the "Iran war threat" theme but generally higher equities, weaker oil prices and declines in other safe-haven instruments like bonds and the Japanese Yen suggest gold is somewhat vulnerable early on.
However, comments from US Fed officials yesterday that rates would stay on hold for now are also supportive but that potential will be heavily impacted with the Non-farm payroll result on Friday.
The Commitments of Traders report showed managed money traders were net buyers of 20,251 contracts for the week ending December 31, increasing their net long to 263,170. This is their largest net-long since October and not too far off the record 310,000 from September.
Non-commercial & non-reportable traders combined were net buyers of 32,798, increasing their net long to 391,901 versus a record 493,000 from September. The large net long held by speculators leaves the market vulnerable to long liquidation selling if support levels are taken out.
Silver also started out strong on Monday, but unlike gold, it did not trade to a new contract high and did not leave any gap.
The COT report showed managed money traders were net buyers of 5,795 contracts of silver for the week ending December 31, increasing their net long to 60,365. Non-commercial & non-reportable traders were net buyers of 10,928, increasing their net long to 99,862. Both of these categories are approaching the levels from September, which were their largest net longs since 2017.
Gold ETF holdings declined by 28,940 ounces yesterday, leaving this year's net purchases at 144,007 ounces. Silver ETFs also reduce their holdings by 1.2 million ounces bringing this year's net sales up to 3.02 million ounces.
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