Tuesday, July 3, 2018

Gold regains $1250 and silver $16 as buying in Asia ramps up here in July

After several weeks of downward movements in the gold and silver markets, July 3 saw what potentially could be a bottom for the precious metals.

With the dollar giving up some gains from yesterday when it climbed back over 95 on the index, a combination of this and two other events may be creating a catalyst for gold and silver prices to regain momentum, especially after they rebounded to $1250 and $16 respectively this morning.

Gold futures on Comex staged a solid comeback from the lowest levels seen since July last year, and now looks to regain the $ 1250 mark heading into the US factory orders data.   
The yellow metal’s rebound today, is mainly driven by the US dollar slide across its main competitors, as markets resort to repositioning ahead of the US Independence Day holiday and July 6 tariffs deadline. 
The greenback’s decline can be also attributed to the flattening of the Treasury yield curve, the spread between the 10-year and 2-year Treasury yields, which is at the flattest since 2017. – FX Street
In addition to the dollar's pullback today, news that JP Morgan has been buying back millions of ounces of short gold contracts from the Comex may also have something to do with today's $15 move in the gold price.
The COMEX gold market structure, by virtue of recent aggressive managed money selling, is easily capable of a sudden rally of $100 or more. After all, the price of gold is now $50 below its key moving averages and the commercials would have little trouble rigging prices higher to the moving averages and an equivalent amount above. This is, after all, the main, if not sole driver of price and what the rinse and repeat cycle is all about. But what makes it special this time is JPMorgan’s pronounced buyback of short positions. 
By buying back at least 50,000 gold short contracts, the equivalent of 5 million oz, JPMorgan has just sidestepped the loss of $500 million should gold rally a quick $100 an ounce, as seems almost inevitable given the overall market structure.  – Silver Doctors
Finally, it also appears that the demand from Asia that has been lacking over the past few months has reversed at the Shanghai Gold Exchange as buying over the past 10 days has increased quite a bit.
Asian buying of gold has picked up lately as the price has fallen, and this may slow any further price declines in the precious metal, says Mitsubishi. “With gold prices down at six-month lows, Chinese buyers have been very assertive of late,” the firm says. Turnover on the Shanghai Gold Exchange’s gold contract has been 11.5% higher in the last 10 days, compared to the same period in 2017, the firm says. “The average local price of gold has been 21% lower in this period than a year ago, leading to a good deal of opportunistic buying from the local jewelry and bar fabrication business, despite the retail market in general being quite quiet,” Mitsubishi continues. “Chinese and wider Asian buying demand ought to continue to cushion further price drops in gold.” - Kitco
The summer months are traditionally the biggest downtime for gold as both volume and investors stay out of this market in favor of other assets.  But with the ongoing trade wars between the U.S. and China creating volatility in the currency markets, a return of the gold bull market may be occurring sooner than usual here in July.

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