While the wave of global economic optimism this week might be based on overly optimistic views toward the control of the virus, the bias again today is for risk on which in turn leaves the pressure on both gold and silver. With another higher high in the dollar, US equities potentially poised to make new all-time highs and stories overnight highlighting the potential hit on Chinese gold jewelry demand, the fundamentals are certainly patently bearish.

In fact, some are pointing out that Chinese physical gold demand was already trending downward with gold jewelry consumption last year reaching a 7 year low. While an analyst overnight has projected China's gold jewelry demand this year would drop by 6% we assume that decline will be much larger because of the virus and could be significantly larger in the event the virus threat leaves large areas of containment in China in place for weeks.

Certainly, the bull camp will see some support from news that gold ETF holdings increased for the 10th straight session and from the fact that prices have now returned to the vicinity of what has been fairly credible consolidation support around the $1550 level.

On the other hand, given the negative charts, it is even more important to realize the net spec and fund long position in gold was probably closing in on the record of long of 402,000 contracts and therefore technical stop-loss selling potential should not be understated going forward.

With economic information from parts of Europe and the UK overnight showing positive readings and this week's US scheduled data pattern also showing positive results, non-Chinese economic uncertainty is expected to decline further. Therefore the bias in gold is down with initial support levels seen at $1550, $1547.40 and then again down at $1542.80.

In silver support is seen at $17.46 and $17.42.

We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.


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.