USAGOLD/Peter Grant/07-21-17
Gold extended to the upside again on Friday, posting a fresh 3-week high of 1255.00, as the dollar continued its recent slide. With important resistance around the 1250.00 level negated, confidence in this year’s dominant uptrend has been reinvigorated.
The dollar index fell to a 13-month low of 93.86 today. Meanwhile, the euro moved closer to the 1.1712 peak against the dollar from the summer of 2015. If this level is ultimately negated, that would put the EUR-USD rate at levels last seen in December of 2014!
Like I said this morning, that’s probably not exactly what the ECB was expecting when they chose to maintain their über-accommodative policy stance yesterday. “Our policies have been unquestionably successful” was Mario Draghi’s self-assessment.
We’ll see how he feels when the stronger euro starts to really adversely impact the European export market. Efforts to unwind their massive €4 trillion (and still growing) balance sheet may cause Draghi to rethink that assessment as well.
Silver is up more than 10% from the flash-crash low of two-weeks ago. If you consider the post flash-crash low of 15.50 as being more realistic, silver is still up $1 (6.5%).
According to Alasdair Macleod, the paper market remains ridiculously short, setting up a classic bear squeeze.
According to Maclead, “the conditions exist for a good rally in the price for the following reasons.”
• The speculators are at their most bearish, ever.
• The bullion banks have, in aggregate, level books.
• The genuine commercials are uncertain, and have increased their hedges, both ways.
• Long-term investors are resolute.
“These conditions generally apply to gold as well, though the situation is not so striking,” says Maclead. This, along with generally bullish technicals and fundamentals, bodes well for additional near-term gains in the precious metals. Maclead believes the unwinding of this situation is “likely to dominate markets for the rest of this year.”
If that is true, and upward price pressures put the squeeze on shorts sooner rather than later, the summer doldrums in the metals market could end early this year . . . and with a bang! You’ll want to establish your position in the physical metals before that happens. And if there is another flash-crash in the paper market, view that as an opportunity to average lower.
