Apparently, the gold market has not been able to firmly embrace the potential for improved Chinese physical gold demand in the wake of the sudden shift away from the building panic off the virus situation. In fact reports from China overnight are that traffic is starting to pick up again and lights are once again increasing at night which in turn has fostered views that the Chinese economy is trying to come back alive.

Unfortunately for the bull camp, the hope for a resurrection of Chinese industrial/physical demand for gold was heavily undermined overnight in the wake of news that Indian February gold imports might have dropped by 41% relative to year-ago levels. Indian consumers continue to be highly price-sensitive especially given poor purchasing power from their currency.

Apparently, India might have imported only 46 tons in February which means the world's second-largest consumer is unlikely to buy unless enticed into action by further notable declines in prices.

However, the gold market should draft some support from news that the Australian central bank cut interest rates overnight and more importantly from a multi-country conference call led by led by the US Federal Reserve Chairman and the US Treasury Secretary on a response to the economic threat from the virus.

Unfortunately, the G7 failed to promise action to battle the headwinds from the virus event but perhaps something will be forthcoming from other financial leaders later today. However, the gold market showed only fleeting lift yesterday from Fed funds rate signals projecting a 99% probability of a 75 basis point rate cut by the US later this month and that is extremely disappointing to the bull camp.

In yet another modest negative, gold ETFs sold holdings yesterday which means holdings have been reduced in two out of the last 3 trading sessions.

The big question for the bull camp in gold and silver is whether the markets going forward will be relieved that physical demand won't be derailed for a significant period of time, or will the trade need to see conditions that prompt a "number" of central banks to act aggressively.

However, we cannot emphasize enough the potential for extreme volatility which should be metered with the use of futures and option combinations. Pushed into the market we give the edge to the bear camp today.

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.