Both Gold and Silver Have Slight Corrections Following Friday’s Dramatic Gains

There he indicated that the Federal Reserve had changed their demeanor to a more dovish stance concerning the onset to taper their monthly $120 billion asset purchases of U.S. Treasuries ($80 billion) and MBS or mortgage-backed securities ($40 billion). However, it was the key distinction that Chairman Powell made between the criteria needed to begin the tapering process and the criteria needed to raise interest rates.

As of 5:15 PM EDT gold futures basis, the most active December 2021 Comex contract is fixed at $1812.70, after factoring in today’s net decline of $6.80 (-0.37%). Silver futures basis the most active September 2021 Comex contract is fixed at $24.015, after factoring in today’s decline of $0.047 (-0.20%).

Gold’s trading range was interesting in that the intraday high of $1828.50 occurs within $0.20 of the 38% Fibonacci retracement at $1826.30. The intraday low occurred at $1810, which is just at both the 100-day moving average and the 200-day moving average. On a technical basis, it is not a far stretch to see these two price points as key and areas of short-term support.

A break above $1826 to $1834 (the highs gold traded to in August) would indicate a continuation of the bullish momentum that began after the flash crash took gold prices to $1677. For the most part, gold has completely recovered from those price declines witnessed a few weeks ago. Our technical studies also indicate that there should be major support for gold at $1793.40, which is the current fix of gold’s 50-day moving average. A break below that price on a closing basis would negate the bullish market sentiment achieved in the recent run-up in pricing.

While the commitment of traders (see commentary below) indicates an increase of bullish market sentiment by money managers, market participants are awaiting the jobs report from August, which will be released this Friday, September 3. Currently, economists polled by Dow Jones estimate that the August report will show an additional 600,000 jobs were added this month. However, that is roughly 2/3 of the new nonfarm payroll jobs added in July. It is this number that is being factored into current pricing. If the actual numbers come in well above or below economists’ forecast, we could see a rebalancing as market participants incorporate the real-time data into their market sentiment.

COT (Commitment of Traders) Report
Today, Neils Christensen, editor at Kitco News, reported on Friday’s COT report, which always lags one week behind the real-time numbers. He wrote, “The CFTC disaggregated Commitments of Traders report for the week ending August 24 showed money managers increased their speculative gross long positions in Comex gold futures by 9,364 contracts to 126,636. At the same time, short positions fell by 7,002 contracts to 51,192. Gold’s net length now stands at 75,444 contracts, up nearly 28% from the previous week. Renewed interest in gold helped push prices back above $1,800 an ounce during the survey period.”

The Delta variant continues to infect Americans at an alarming rate, with many hospitals in the states containing low vaccination rates. This has put a tremendous strain on their healthcare system, with many hospitals running out of ICU beds. As of Friday, August 27, there were over 150,000 new cases of the Covid 19 virus. The vast majority of those in the hospital (approximately 90%) are individuals that did not receive the vaccine. More alarming is that the largest percentage of new infections is occurring with a much younger age group than the first major wave of the pandemic.

This recent surge in new cases is the greatest unknown as to how it will affect the economic rebound in the United States that has been occurring over the last three months.

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Wishing you, as always, good trading and good health.

Gary Wagner