Can Gold Decisively Break & Hold Above Its 200 DMA?

Former Head of Metals at JP Morgan Robert Gottlieb breaks down the trading action in gold & silver in the wake of the US Treasury Dept’s announcement Wednesday that they will begin DOUBLING purchases of 30-Year bonds in September, which sent precious metals ROCKETING HIGHER:

Gottlieb posted his thoughts on the trading action Thursday:

“Despite Crude Oil Futures Up 2.2%, #Silver Surges 4.4% While #Gold Gains 0.4%

Silver is having an impressive day, up approximately 4.4%, despite crude oil futures rising 2.2%.
Gold is also higher, although by a more modest 0.4%.

Gold traded in a wide $90 range today and, importantly, traded above its 200-day moving average at one point before giving back some of its gains as the U.S. dollar rallied late in the session.

This appears to be a continuation of yesterday’s rally following news that the Treasury plans to begin purchasing 30-year bonds in September, potentially helping contain pressure on long-term yields.

Treasury Secretary Bessent is clearly focused on keeping a lid on rates at a time when U.S. national debt has officially crossed $40 trillion for the first time, while markets continue to assess possible FOMC actions. As I mentioned previously, there is also substantial open interest in GLD options between the $410 - $450 strikes. As GLD moves higher, dealers who are short calls may need to increasingly delta hedge by buying GLD, potentially adding fuel to the upside move.

What I find particularly encouraging is that crude is up sharply today and precious metals are rallying anyway. Given the inflationary implications of higher energy prices, that resilience suggests to me that this rally has some real strength and wants to continue.

The implied December Gold EFP on WatchGold.org is currently displaying approximately $56.05, very close to where the broker market marked it today.

At around $56, the December Gold EFP represents approximately a 50-basis-point premium to the London OTC market. At these levels, it would make sense for banks to add to their short CME/long London OTC positions, effectively selling the EFP to capture that premium.

And then there is silver. After lagging gold’s initial move, silver appears to be playing catch-up today. A 4.4% rally against a backdrop of higher crude oil is noteworthy and worth watching closely. Gold is testing an important technical area, silver is accelerating, and the EFP remains elevated. Let’s see whether gold can decisively break and hold above its 200-day moving average.

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Watchgold spot/USD 1 day chart: