CPM Group's Jeffrey Christian says the sell-off in precious metals may not be finished. Gold is testing lower levels while ETF investors and Russia's central bank keep reducing holdings, and a dealer bankruptcy has put counterparty risk back in focus.
Some gold buyers are waiting for lower prices before they step back in. According to Jeffrey Christian of CPM Group, gold is trading near $4,150 and keeps testing the $4,100 area. He adds that some investors and central banks want to see whether prices break below $4,000 before returning as buyers. Silver looks similarly heavy.
Gold and silver stay under pressure
Christian sees room for silver, trading near $60, to move toward $55. CPM Group is also less convinced that anyone waiting for $40 or $45 silver will get those prices. The message on both metals is caution rather than a bottom.
ETF selling and central-bank retreat
Fund flows help explain the recent drop. Christian reviewed gold ETF data showing that investors sold roughly 2.1 million ounces during June, which he cited as a factor behind the price decline. Official holders have been trimming too: Russia sold gold in ten of the past 12 months, pulling its central-bank reserves down to about 72 million ounces.
Counterparty risk returns
The bigger warning is about who sits on the other side of a trade. Christian pointed to a dealer bankruptcy involving about $40 million in customer payments for metal that was never delivered, plus money owed to customers who had sold metal to the firm. Because of this, he urged buyers to understand their counterparties before purchasing physical gold and silver.
On platinum and palladium, Christian tied continued weakness to softening auto demand. He pressed investors to lean on research rather than social-media hype.
Sources: Kitco News, IndexBox
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