Dillon Gage is proud to offer the following insights into the precious metals market from Roy Friedman. Roy has over 30 years of in-depth experience in all facets of precious metals. We offer Roy’s comments several times each week.
Precious metals have traded quietly on light volume since trading resumed yesterday. Physical demand in Hong Kong and Tokyo highlighted the Asia / Pacific session, while London and Europe, which were very active and volatile last week, began the week uneventfully. Early trading in the U.S. has also been featureless as market participants are still talking about Friday’s price action and the markets’ reaction to the non-farm payroll data and unemployment report.
The payroll number turned out to be quite weak, especially after many economists revised their number higher following Thursday’s better than expected ADP report. Only 80,000 new jobs were created in June and unemployment remained at 8.20 percent. As expected the initial precious metals reaction was a move higher, but this was short lived, and as our markets reversed course selling pressure and volume increased as gold fell almost $35.00 before closing at $1,578.90 with a loss of $30.50. Our market’s reaction is still difficult to explain, but I will give it a try. With short term traders already positioned long on the back of continued weak economic data and recent events in the Euro zone, precious metals were poised for a round of profit taking, as we had already failed to convincingly break through resistance from $1,625.00 – $1,640.00. Friday’s data, while weak as witnessed by the reaction in the global equities market, was not quite weak enough to convince precious metals traders that QE3 would be unveiled at the FOMC’s August meeting and the rush was on to liquidate long positions.
We begin the week with gold trading in the middle of the recent trading range. As gold sells off and we begin to fear a further breakdown, physical demand and weak economic data support the markets and gold bounces off $1,525.00. As we begin to get optimistic and confident of a new higher trading range with gold above $1,600.00, the market fails to convincingly trade through and above resistance from $1,625.00 through $1,640.00. While the USD has rallied of late and added to pressure in our market, I continue to favor a second half of the year rally; and while we may not get QE3 in August, I will be shocked if we do not see it late in the third quarter or early in the fourth quarter this year.
This will be my only commentary for the week.
Roy Friedman has a degree in economics and political science from the State University of New York at Binghamton. For more than 30 years, he has worked at all levels of he industry including as a trader for major Metals firms and international banks. For more information on Mr. Friedman, please click here.