Despite an early rally attempt on Friday, gold and company closed on the defensive as the USD continued to strengthen throughout the day. Fueled by growing speculation of a hike in U.S. interest rates, we also have comments from European Central Bank President Draghi that they are ready to act quickly in an effort to further support their economy. This translates to a scenario where the USD continues to strengthen and thus the continued pressure on precious metals and most commodities. Central Bank decision time is rapidly approaching as the ECB meeting is scheduled for December 3 and the FOMC meeting takes place on December 15 and 16.
According to recent IMF data, central banks continue to aggressively buy gold on the dips which has been the pattern for the past 3 plus years. In October, The Russian Federation purchased over 18 metric tonnes, China purchased just under 15 metric tonnes and Kazakhstan added just under 3 tonnes. Perhaps the continued purchases and diversification by many of the world’s central banks are telling us all that physical precious metals belong in every large and small investment portfolio.
This morning finds our market under pressure but off the lows as crude oil trades below $40.00 and as concern mounts that rising global inventories can see crude drop another 10 percent. As volume and liquidity exit the market in front of the Thanksgiving day holiday in the U.S., we may be poised for a short covering rally in gold and silver but resistance will be stiff above $1,085.00 and $14.40.