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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.
This editorial has been prepared by Roy Friedman of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not prove to be true, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept the foregoing.