The markets closed mixed on Thursday ahead of the important jobs number on Friday.
The Dow Jones Industrial Average closed down 12.5 points, the Nasdaq was lower by 9 points, the Russell 2000 was down 2 points, and the S&P 500 closed higher by 1 point.
This all followed one of the lowest volume days in 2016 for the S&P 500 Trust Series ETF. It traded just over 62 million shares.
Perhaps the most important sector this week has been gold, with the SPDR Gold Trust down 6% with one trading day left in the week.
What has happened to spook the gold bugs? There was no shortage of explanations as usual. The main theme was that the dollar is getting stronger partly due to sterling weakness and the U.S. economy getting stronger.
But we all know that is not the case. The drawdown in the gold price reflected weak hands getting washed out of the market. The weak hands are those in the paper gold markets, such as gold futures and ETF's that are using margin or derivatives. That selling begets more selling, which feeds on itself as so on until the market finds a new level.
Remember that the sellers, "western officials" deliberately waited for a Chinese holiday before smacking down gold and silver prices. China will be back to work Sunday and it would appear that investors there will be back buying gold to capitalize on the gold discount.
The rate hike, strong dollar scenario appears to be temporary. Soon, the reality of lower growth and a weaker dollar will sink in. Then, gold will make up the lost ground of this past week and surge ahead.
Remember, the Chinese yuan is pegged to the dollar, and the Chinese will not be eager will be eager to see the dollar surge again. Fireworks could be on the agenda as the China yuan is devalued. Something to keep in mind.
In sum, as the gold market is manipulated, Russia and China will continue to be big buyers. Over the past six years,Russia and China combined to purchase 6000 tons of gold.
Attached is the Daily (GLD) chart. It clearly shows the SST Strategic Number oversold with a 2.22 and the Weekly also oversold with a 5.11.
It appears that this is a great time to accumulate gold or gold mining shares.
This article is commentary by an independent contributor. At the time of publication, the author was long (GLD) and gold mining ETF's.