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While the net spec and fund long in gold (adjusted for the $30 rally into Friday's high) suggest the market is heavily overbought, we suspect technical signals will take a backseat to classic flight to quality headline news flow.

However, with the post-COT report rally, the net spec and fund long in gold is likely the longest in two years, and therefore any sign of a cease-fire between Israel and Hamas could result in a massive correction.

Gold positioning in the Commitments of Traders for the week ending April 23rd showed Managed Money traders net bought 3,296 contracts and are now net long 176,157 contracts...[MORE]

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Once again noted strength in gold and silver prices appears to be taking place in a vacuum, with little change in US interest rates, the dollar, and energy prices overnight.

However, the bull camp is likely benefiting from a surprise jump in Chinese first-quarter gold consumption which increased by 5.9% from year-ago levels.

Apparently, mainland China's March gold imports through Hong Kong increased by 40% from February giving credence to news earlier this month that Chinese investors were seeking to hold gold to avoid weakness in the domestic currency...[MORE]

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With the gold market over the last 72 hours settling within a range bound by $2350 and $2300, it is possible that some form of value has been found ahead of what is likely to be a key fork in the road for prices.

Fortunately for the bull camp, the dollar is showing signs of tracking lower this morning as the aggressive liquidation this week has clearly rocked the bull camp back on its heels.

While the February to April rallies in gold and silver were not fueled by definitive inflows to ETF holdings, both gold and silver holdings continue to decline in a sign that small investors have not been enticed by the second half of April setback...[MORE]

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In retrospect, the gold trade was unsure of the primary source of the massive April upside extension of the historic gold rally which began early last October.

While the trade remains vulnerable to additional stop-loss selling today from very large net spec and fund positioning, further extraction of war premium is also expected with the gold futures and options positioning (adjusted into the recent highs) likely at three year highs!

However, Bloomberg overnight carried a story suggesting a large portion of the gold rally was sparked by aggressive buying at the Shanghai futures exchange...[MORE]

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The capitulation in gold and silver extended overnight with what we think is mostly stop-loss selling from the massive net long built up from the $425 gold rally off the February low and the $7.50 rally in July silver.

However, ongoing liquidation of flight to quality longs from lower ME angst is certainly adding to the washout while typical outside market influences of the dollar and treasury yields have not been a noted influence and are unlikely to be a key impact today.

In retrospect, there was apparently more flight to quality longs in off the potential for a widespread Middle East war than expected and that should be remembered if conflict returns...[MORE]

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Good morning. The precious metals are lower in early U.S. trading.

U.S. calendar features S&P Global PMI - Manufacturing/Services - Flash, New Home Sales, Richmond Fed Index, M2.