Consolidation and Liquidation
After an impressive two week run up, gold and silver are now consolidating as they wait to digest tomorrow’s FOMC minutes. At the tail end of last week, gold was able to break through $1,350 resistance. Stops were triggered and it made its way up to the 100 day moving at $1,373.50 before stalling. This remains the next objective for gold and it will need a close above this area to encourage fresh longs. The figure of $1,350 has now become support and there were strong Asian bids waiting ahead of it in the overnight session to lift the yellow metal higher.
At its apex yesterday, silver was up over 23% since August 7th. It sold off overnight but has since recovered all of its losses as it attempts to consolidate above $23.
In the backdrop of these bullish moves we’ve seen in gold and silver recently is some slightly discouraging news on the fundamental front. ETF holdings have seen recent liquidation from institutional as well as retail investors. The Shanghai Gold Exchange premium versus London has also dropped by about $10 / toz in the last week. Since peaking in April of this year, volume on the SGE has decreased and is now hovering around a four month low. This is not an especially encouraging sign for the broader Asian region. We are still in the midst of summer though and with the historically bullish month of September right around the corner, this may be nothing more than just a temporary effect of the summer doldrums.
