From the Trading Desk
The tumultuous start to the year for equities has once again given investors reason to contemplate having exposure in precious metals. In the last week, investors have bought nearly 900,000 toz of gold via exchange-traded instruments backed by the metal. This is the biggest increase in ETF holdings since January of 2015 and demonstrates gold’s safe haven appeal during times of stock market turmoil. In the official sector, central banks have stayed steadfast in their precious metals strategies with China adding gold to its reserves for the sixth straight month in December.
Despite investors warming up to the precious metals this year in general so far, the Dow Jones surging over 200 points today caused gold and silver to sell off. The inverse correlation of equities to precious metals has been particularly strong this year and the risk-on sentiment of the broader market today resulted in gold bids evaporating. The short term momentum is downward but there is support from the third point in a trendline at $1,067. Resistance is coming in at the double top of yesterday and today at $1,096. Silver ultimately failed at its 50 day moving average and erased all of yesterday’s gains in today’s session. It has held for three days in a row at $13.75 and continues to trade on either side of $14.
Today we had a continuation of the range bound move in gold, this time down $10. Silver also gave back some of what it gained yesterday. The dollar started the day down and moved higher all day back up over 99 again.
Yesterday I was adamant about buying gold so you have it but no, this was not my “all in” call yet. I still think we have a date with under $1,000 and lower. It fits in with what you see going on in oil, natural gas and grains where pretty much all commodities, especially the non-precious kind like copper and palladium, are getting hit hard. Deflation anyone?
Look at the Baltic Dry Index which is at record lows. There is no overseas activity and I can tell you this, as bad as it is, it will get worse. Don’t let today’s stock market moving up 200+ points fool you.
Chart from: http://investmenttools.com/futures/bdi_baltic_dry_index.htm
More coming later
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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