Hawaii Six O - Gary Wagner
Gold and Silver Prices Explode to the Upside
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Both gold and silver futures traded sharply higher today in response to continued concerns that the trade war between the United States and China will get worse before it gets better and any sort of resolution is achieved. Still on the table is the initiation of new tariffs on the remaining $300 billion worth of Chinese imports sent to the United States go into effect on September 1st.
There will be no face-to-face negotiations between China and the United States until after the new tariffs go into effect. Add to that is the fact that most central banks around the world have been moving towards a much more accommodative monetary policy as they lower interest rates and make cheap money more available. It is also believed that there is a high probability that the Federal Reserve will initiate additional rate cuts beginning in September and possibly another rate cut in December. This sets the stage for global quantitative easing, and as such will be highly supportive of bullish market sentiment for gold and silver.
As of 4:10 PM EDT gold futures basis the most active December contract is currently up $25.20 and fixed at $1509.40. Gold futures have traded to a high today of $1522.70 before short-term traders began to take profits which resulted in gold trading $13 off of the high achieved earlier today. Silver had a stellar performance today breaking strongly above $17. Currently silver futures basis the most active September contract is trading at $17.10 which is a net gain of $0.65 on the day which amounts to a 4% gain. Silver traded to a high today of $17.26 before backing off slightly as short-term traders took profits.
Another factor prompting some short-term traders to take profits was U.S. equities recovering from the lows seen this morning. The Dow Jones Industrial Average is trading at 26,007.07, after trading to a low of 25,440.39 earlier in the trading session.
Collectively these fundamental factors have created a perfect storm scenario for both gold and silver pricing which have strengthened their resolve as safe haven assets.
As reported in MarketWatch, Edward Moya, senior market analyst at Oanda wrote that â€śGold captured the $1,500 an ounce level and the rally seems set to roll on as no one is expecting any immediate progress on the trade front and the proactive easing efforts from central banks globally. When the Fed capitulates later this month that could be the catalyst to support the drive towards the $1,650 an ounce level.â€ť
It seems highly likely that gold pricing will hold and maintain a price point above $1500 per ounce and move higher from this price point. It also seems likely that silver could find strong support at $17 per ounce and also move higher.
The key is as long as the trade war deepens and no resolution is found central banks will continue to take steps to continue the economic expansion that has been threatened recently. If tariffs are imposed on September 1st, we could see a major explosion in gold and silver pricing to the upside continuing the most dynamic rally witnessed since the rally of 2008.
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Wishing you as always, good trading,