Gold Slips as Dollar Bounces, Oil Fades; But Commercial Players Fast-Building Strong "Long" Position as Hedge Funds Go Short
Gold Prices slipped out of a tight 0.5% range lunchtime in London on Monday, moving below last week's close at $831 per ounce as world stock markets fell and bond prices rose.
Crude oil slid back to $114 a barrel as Hurricane Gustav moved towards Louisiana, closing every oil-rig in the Gulf of Mexico but not gaining strength as it approached a near-deserted New Orleans.
Over in Tokyo, the Nikkei stock index ended the first day of Sept. some 15% below its start of the year.
Here in London, the FTSE100 dropped 80 points at the opening to stand at 5,587 by late morning – also 15% down for '08 to date.
"The International Energy Agency (IEA) has pledged to release emergency oil supplies if hurricane Gustav disrupts oil infrastructure in the Gulf of Mexico," notes Manqoba Madinane in today's Gold Market report for Standard Bank.
"This should absorb the speculative premium in crude oil prices and render an oil price rally unlikely today...[keeping] precious metal investment sentiment subdued amid thin market trading volumes into the New York session."
With Wall Street closed for the Labor Day holiday, the US Dollar continued to rise on the currency markets this morning, pushing the Euro back towards $1.4600.
The British Pound meanwhile sank to its lowest level vs. the Dollar since April 2006 after the UK finance minister, Alistair Darling, said in a weekend newspaper interview that the current economic turmoil – the worst in 60 years, be claimed, ignoring the recessions of the 1970s, '80s and '90s – is partly his government's fault.
Today brought news that UK home-loans sank to a fresh low of just 33,000 in July – down more than 70% from the same month last year.
Despite the collapse in residential UK real estate, however – now priced 10% below the all-time peak of summer '07 – the country's money supply continues to expand at a near-record pace.
New borrowing by hedge funds, stock brokers and other financial corporations grew by 31% in the year-to-July – a fresh all-time record and more than twice the average annualized growth so far this decade.
Today the Gold Price in Pounds Sterling – which has more than doubled in the last three years – touched a four-week high above £462.50 per ounce.
"[In Dollars] still 835 is the big level," says Phil Smith's technical analysis for Reuters India.
"All the recent closes have been below and US trading on Friday did not break the pattern. One to watch for sure and a break above would set up a move to the next resistance point [at 859]."
In the Gold Futures market last week, commercial traders – including refinery groups looking to protect themselves against a changing Gold Price – grew their bullish bets by 8% according to the latest official data.
That took the number of outstanding "long" positions held by gold-industry players to a 15-month high. Their "short" positions were little changed, meantime. So as a proportion of their total position, bullish contracts rose above one-in-three of all contracts held by commercial traders – the largest proportion since the same week in 2007.
Hedge funds, in contrast – and along with other speculative players in US gold futures – rapidly added to their bearish positions, says the Commitment of Traders data. They added one new "short" contract for every three already open.
Overall, these non-commercial traders pushed their bullish ratio down further from the recent record of 89% to just 79% – again, the same level as the end of Aug. '07, just before Gold Prices leapt by more than one-half inside six month.