From the Trading Desk
Gold was trading lethargically yesterday when a 9,500 lot (950,000 ounces) sweep on the electronic exchange yanked it from $1,186 all the way up to $1,200 in a matter of minutes. This occurred right around the time of the PM fix and it was a much needed bullish move after the poor close gold had to finish last week. Yesterday also represented the biggest volume day of the June gold contract with over 200,000 lots trading during the session. The USD has been on a recent decline and the dollar index is at a three week low. Yesterday, economic data showed that the US services purchasing manager’s index fell below economists’ estimates. This helped keep gold above the $1,200 area after the sweep and it seems like participants are now awaiting the FOMC tomorrow before adding to positions. Gold still remains in a range with some significant resistance levels looming overhead at the 100 and 200 day moving averages ($1,211.40 and $1,224, respectively). Any deviation from FOMC expectations tomorrow may be exactly what gold needs to break out of its recent range. Silver rallied an impressive 4.25% yesterday and is now sandwiched between its 50 and 100 day moving averages.
The dollar weakness is just what the gold bulls needed. Tomorrow we have the GDP data in the morning and then later the Fed announcement on interest rates which should be a non-event. Either way I still lean long gold and will so as long as the dollar continues south. Look to it for some clues tomorrow.
I do note the 10 year is at 2% again, right at resistance. I am still in the camp of lower rates and lower gold prices ahead as well as a stronger dollar, but for now it looks like the opposite is occurring. Nothing that is earth shattering in my book as trends don’t go in one direction all the time. There are always reversals.
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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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