From the Trading Desk
In the overnight session, strong Chinese demand caused the Shanghai Gold Exchange arbitrage versus the spot market to move from a $1 discount to a $1 premium. The presence of Chinese buyers lifted gold to challenge $1,250, a figure it has tested, yet failed to close above, on three separate occasions this year. The failure at the $1,250 handle overnight though was followed by further selling in the US when data showed that US factory activity expanded more than economists expected. The ISM manufacturing index for the month of February climbed to 49.50, the highest since September. The USD gained ground against a basket of currencies while bids for gold disappeared.
Resistance for gold remains at $1,250 while support is coming in at $1,220, the eighth point on a trendline dating back to February 10th. Silver has sold off more than gold recently but managed to hold support at its 100 day moving average of $14.65 yesterday. With the 50 day moving average coming in at $14.55, silver will look to stand its ground at the convergence of the 100 and 50 DMA.
Yesterday I said that we might get a sell off soon as it was fund managers buying anything gold the last day of February so they look good to their shareholders. Fund managers have to be the worst investors on earth as they continue to not beat the indexes. Their late buying was the smart investor selling and now we have the beginning of some possible good weakness as the stock market moves higher and the VIX falls.
Let’s see if we caught the top of the gold market today in the weeks ahead.
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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