Will Gold and Silver Follow Crude Oil’s Suit?

Gold consolidates just below the $1,200 per ounce with no fresh news or direction for traders to latch on to. Renewed dollar strength follows unclear FOMC minutes, which could’ve been interpreted anyway to suit your own view on the FED’s ultimate intentions. This is capping any sustained Gold rally.  Gold failed to hold key 1205 support, after briefly climbing to 1224 just before Easter, returning to its high volume comfort zone of around 1200.  Traditionally, precious metals now enter the seasonally-low period where physical demand historically declines. However, the yellow metal is showing resilience, with higher lows and higher highs, with the next few trading sessions crucial for bulls that we maintain above the 1190 level.  Last night did see this level break, only to claw back losses, closing at $1193, after weaker than expected US retail sales and slump in small business confidence.

Interestingly, the Commodity Futures Trading Commission (CFTC) reported that the Comex speculative traders increased their net-long positions in gold to 100,757 contracts, which marks a five week high, up from 80,019 a week earlier.  A sustained build in price and an adjustment in current bearish sentiment, could rise the likelihood for further long accumulation and short-covering in the coming weeks. However this still poses risks, as this data proves the market remains highly speculative, and therefore vulnerable to price swings. Good news is we’ve already seen Crude oil prices recover 15% over the past month, leading a small commodity revival, as investors seek value in beaten up sectors. Will Gold and Silver follow suit?

By Adam Van Sambeek, Treasury Manager.