by Craig Hemke, Sprott Money:
Get ready for a shift in the precious metals markets as August comes to a close. Learn how recent data releases and market trends could impact the gold and silver price in the upcoming weeks.
August is typically a very quiet month for the COMEX precious metals as traders everywhere try to sneak in one last vacation before summer ends. Those “dog days” are now drawing to a close, so we should all brace ourselves for renewed volume and volatility as the calendar moves toward September.
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Volatility and Opportunity Ahead for Precious Metals
The doldrums will begin to end this week. As soon as Tuesday, the news flow begins to pick up with the release of the latest JOLTS job openings data in the U.S. The fun continues with inflation and spending data on Thursday before the next U.S. jobs report is released on Friday. Here’s the list of scheduled news that can impact gold and silver:
And just a warning ahead of Friday’s U.S. employment report. These reports have been either exceeding or missing “expectations” in 2023, in large part due to the statistical guesswork of the monthly birth-death adjustment. The “adjustment” to the August report should be about +100,000 “jobs”, compared to the 280,000 added to the July report. As such, don’t be surprised if this Friday’s report comes in “below expectations” and with an uptick in the unemployment rate.
All traders should be back at their stations by Tuesday, September 5, following the U.S. Labor Day holiday, bringing with them as they return even more volatility and volume. The data next month should continue to show a weakening U.S. economy and, by the time of the next FOMC meeting on September 19-20, we’ll all be waiting to hear if the Fed’s interest rate guidance is adjusted.
Significant Market Movements for COMEX Silver
In the meantime, the COMEX precious metals have begun to turn higher following the latest washout of spec long interest and surge of spec shorting. We’ve been writing about COMEX silver the past two weeks and warning that another short squeeze and price rally was pending. Silver is already about $2 off its lows and looking to trend higher in the days ahead.
Get caught up on the latest developments in COMEX silver by reading these recent articles:
Promising Trajectory for COMEX Gold
And now the positioning for COMEX gold has gotten quite favorable, too. The latest Commitment of Traders survey was taken on Tuesday, the 22nd and the positioning as of that day was the most favorable for gold since the price lows of November 2022. Be sure to note that the combined gross short position in the Large Speculator (mostly hedge funds) category was 124,394 contracts, the largest since November 15, 2022.
However, back in November of last year, the peak of the Large Speculator gross short position actually occurred on November 1, and the short squeeze commenced soon thereafter. In a move similar to what we just experienced, price had been driven lower from mid-August to mid-October as hedge funds dumped longs and added shorts. How sharp was the squeeze that followed? More than 10% in about five weeks. Here’s a reminder in case you’ve forgotten.
COMEX Precious Metals Market Prepares to Bid Farewell to its Tranquil Phase
So buckle in and be ready for the return of volatility, and expect most of it to be to the upside. Trader positioning is ripe to be squeezed, and overall sentiment is poor, both of which are classic signs of a price bottom. Any sort of unexpectedly bad economic headlines or perceived “dovish” statements from the Fed can and will set off a daisy chain of short covering and higher prices.
