7 Signs That the Gold Market Remains Resilient

Gold and silver prices ran out of momentum during the first week of July and have been drifting lower ever since. A deeper correction seems like a realistic expectation, but precious metals are showing strong signs of resiliency. Here are seven forces that should be creating headwinds for precious metals, but are barely having any impact.

1) Increased Margin Requirements – The CME raised margin requirements in the futures market for both gold and silver during July. Raising margins makes it more expensive for paper speculators to keep their positions. This type of increase in margin requirements often results in a sharp and sudden drop in the price.

2) Futures Expiration Approaching – The expiration of the futures contract is coming up on July 27 for gold and July 26 for silver. There is a fairly strong historic pattern of gold and silver prices dropping sharply just prior to expiration. Many believe paper manipulators use leverage, false bids and employ other tactics to send prices tumbling so that they can cover and profit from their short positions.

3) Bearish Commitment of Traders Report –  The COT showed that speculative gold longs decreased their positions for the first time in more than a month, while shorts increased their own positions for the third week in a row. Short positions by commercial traders are near record levels and almost 2.5 times their long positions. We will get a better picture when COT data is released on Friday, but the expectation is that this trend continued throughout the most recent period.

4) Declining GLD Inventories Suggest Profit Taking – The GLD ETF has accelerated, especially by speculators and traders that have generated huge profits in the first half of the year. They do not have a bullish long-term view of the precious metals market or any philosophical reasons to be invested. They do not fear a crash in the stock market or dollar crash. They just bought the momentum and now that the momentum has slowed, they are likely cashing out. This is certainly evident in the declining GLD ETF inventories over the past few weeks.

7 Signs That the Gold Market Remains Resilient first appeared in http://goldstockbull.com