Precious metals traded on heavy volume last week, as prices continued moving lower in reaction to hawkish comments from FOMC members and stimulus programs abroad which continue to strengthen the USD. Friday’s rally in gold may have caught many by surprise, as a slightly weaker than expected employment report saw the USD back off while bonds rallied. The bears though were not scared off as gold was unable to break above resistance beginning at $1,180.00. Trading resumed yesterday, with a continuation of the heavy volume, but despite excellent physical demand throughout the Asian trading day, gold ended the session $10.00 lower than where it opened and never challenged $1,180.00.
This morning finds all four precious metals trading below Friday’s settlement prices as it appears the first test this week will be to the downside, as the bears will look to see if the heavy physical demand continues or backs away before resuming at lower levels. As expected, data from the CFTC shows that long positions on the futures exchange continue to be liquidated while short positions continue to increase. The lower spot prices have certainly had a positive impact on our corner of the market as a sharp increase in physical demand especially in silver has many products trading with delayed delivery as premiums move higher. In the short term, it is difficult to highlight support levels as looking for them feels like standing in front of a moving train, but a gold close above the 10-day average at $1,177.50 could see gold quickly testing $1,200.00. Silver on the other hand looks “cheap” if you follow the gold silver ratio which is trading at 74.40 this morning.
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