Gold News

Gold Price 'Still Not Bullish' as GLD ETF Shrinks, Comex Short-Covering Ends

GOLD PRICES dipped on Monday alongside world stock markets as the US Dollar rose amid concerns over further Chinese Covid-19 restrictions and analysts contrasted the recent short-covering in Comex gold derivatives with further outflows from giant ETFs the GLD and IAU, writes Atsuko Whitehouse at BullionVault.
With the Dollar Index soaring 0.8% Monday lunchtime to the highest level in over a week, the spot gold price for bullion settled in London fell 0.5% to $1742 per ounce, adding to its 1.2% drop from last week and sharply down from last Tuesday's 1-month high at $1786.
That still gave the yellow metal a 6.0% increase for November, paring gold bullion's year-to-date loss to 3.8% in US Dollar terms.
China today put the largest district of southern city Guangzhou into lockdown and closed schools across the capital Beijing as outbreaks of Covid-19 continue to spread following the country's first Covid-related death in almost 6 months on Saturday.
Gold priced in Euros meantime edged higher by 0.3% at €1700 with a 2.6% gain so far this month and 6.0% for 2022 so far, while the UK gold price in Pounds per ounce edged higher by 0.2% at £1476, holding 3.4% rise in November and 10% in 2022.
"While a stronger Dollar driven by FOMC hawks is weighing on prices, gold's biggest short-term threat remains long liquidation from funds who in the runup to last week's failed attempt to break resistance around $1800 had bought gold futures at the fastest pace since June 2019," says derivatives platform Saxo Bank's Strategy Team.
"The sharp rise from $1620 was largely due to short-covering," agrees Bruce Ikemizu, chief director of Japan Bullion Market Association, "and there is a growing view that this is not yet a fully bullish market."
Chart of Comex managed money net positioning in gold (tonnes) equivalent. Source: BullionVault
Speculators on the US Comex futures and options exchange last week reversed their net betting against gold prices, flipping from a notional equivalent of 120 tonnes net short – near the heaviest bearish bet since November 2018 – to a net long position of more than 126 tonnes.
That was still below the 2022 average net long to date, according to positioning data for Tuesday last week from US regulators the CFTC. That average itself comes in at 182 tonnes, down by 35% from 2021.
In contrast to the Comex rebound, gold-backed ETF products liquidated metal yet again last week as both the SPDR Gold Trust (NYSEArca: GLD) and the iShares gold ETF (NYSEArca: IAU) saw net investor outflows.
On a weekly basis, shareholders cut the quantity of bullion needed to back the GLD by 0.6%, taking its outflows to 7% so far this year following a 17% loss in 2021 and 31% gain in 2020.
The smaller iShares gold ETF (NYSEArca: IAU) also shrank last week, taking its accumulated outflow to 8% year-to-date after a 6.5% drop in 2021 and 46% growth in 2020. 
Chart of the GLD and IAU gold ETFs' combined bullion backing. Source: BullionVault
"If the economy proceeds as I expect," said Atlanta Federal Reserve president Raphael Bostic, a non-voting member in 2022 and 2023, on Saturday, "I believe that 75 to 100 basis points of additional tightening will be warranted."
Setting the Fed's key interest rate at a 5% ceiling, "This will be sufficient to rein in inflation over a reasonable time horizon."
But a three-quarters point hike at next month's December meeting is "still on the table" said Susan Collins, voting member and president of the Boston Fed, during an interview with CNBC last Friday.
Their comments came after a raft of Fed officials last week stressed the need for further rate hikes in the face of inflation still running near this summer's 4-decade highs.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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