While a significant amount of uncertainty continues to emanate from China and the Chinese have not indicated the status of their containment efforts, anxiety has been tempered by the aggressive Chinese support for their economy from a large liquidity injection.

However, it does appear as if a quasi-side deflationary vibe has settled into many physical commodities perhaps because comments from Citibank suggesting the Chinese virus will have a "very deep" impact on commodities. Not surprisingly analysts are predicting a steep decline in Chinese demand for "physical" gold because of the disruption of the economy.

With one estimate suggesting Chinese oil demand has fallen by 20% since the virus outbreak, it is clear that the amount of lost demand for certain physical commodities will indeed be very significant. Overnight an analyst indicated Chinese gold demand during the outbreak of the SARS virus fell off by 32% versus the prior quarter and with Chinese 2019 gold demand 4 times as large as 2003 Chinese gold demand the potential negative impact on global gold prices is very large.

The January 28th Commitments of Traders report showed Gold Managed Money traders were net long 257,634 contracts after decreasing their long position by 1,556 contracts. Non-Commercial & Non-Reportable traders were net long 386,099 contracts after increasing their already long position by 8,574 contracts.

The January 28th Commitments of Traders report showed Silver Managed Money traders are net-long 48,962 contracts after net selling 9,104 contracts. Non-Commercial & Non-Reportable traders are net-long 89,865 contracts after net selling 6,386 contracts.

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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.