Precious metals drifted lower this week, with gold hitting new lows and silver challenging the low level of $13.96 achieved on 26 August, but so far holding just above it. Gold has fallen for 23 days in a row, apart from a $1 rally on Monday, leaving it down 9.6% on the year so far, with silver down 8.9%. The bloodbath extends to the whole commodity complex, with crude oil down 14% and copper down 12%. The common feature is dollar strength.
Banks trading in commodity futures nearly always run short positions. This is the same as saying they are always long of US dollars, and the current dollar strength should be regarded in this light. While commodity weakness is signalling falling demand today and the expectation of lower demand in the near future, there is little doubt that the US Fed’s stance on interest rates is exaggerating price moves, from the dollar’s side. This has led to extremely oversold conditions across the full range of energy and metal markets.
This post was published at GoldMoney on NOVEMBER 20, 2015.
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