Gold News

"Robust" Gold Price "Surprises" Analysts as Speculators Go "Overweight"

GOLD PRICE gains of 0.4% from last week were erased in quiet trade Monday morning, with the metal twice dropping to bounce off $1312.50 per ounce.
 
World stock markets also slipped, but Brent crude oil steadied above $110 per barrel.
 
The US Dollar recovered an earlier drop to hold the Euro below $1.36, buoying the gold price for Eurozone investors above €965 per ounce.
 
Silver followed the gold price, slipping from its highest weekly close since mid-March to dip beneath $21 per ounce.
 
"The gold price's relative robustness comes as a surprise to many observers," say analysts at Germany's Deutsche Bank, a market-making member of the London bullion market, citing rising stock markets and last week's announcement of significant miner hedging from No.1 Russian producer Polyus.
 
Rising for a fifth week running, the gold price "is quite remarkable," says Deutsche, "because the metal braved many formidable headwinds during most of that period."
 
"Gold's current shine is unlikely to last," says Societe Generale analyst Robin Bhar, pointing to "continued tapering of the Fed's asset purchase programme and, later on, a gradual normalization of [rate] policy, weighing on gold's safe haven appeal."
 
But the gold price looks "well-supported at the moment...by the dovish of central banks," says French investment and bullion bank Natixis' commodities analyst Nic Brown, speaking to CNBC and saying the US Fed looks likely to wait "too long" to raise rates as the economy "normalizes".
 
With US traders due to return Monday from the long Independence Day weekend, Asian gold and silver trading was quiet according to several dealers.
 
Shanghai gold prices fell near 2-week lows versus the rising Yuan, and held a discount to London gold – the world's wholesale benchmark – of $1.50 per ounce.
 
Speculators in US gold futures and options last week grew their bullish betting to the highest level since November 2012, new data showed Friday, with speculators as a group cutting their bearish bets to a 3-month low.
 
Net-net, that put the so-called "spec long position" equal to some 523 tonnes, the highest level since mid-March and well over twice the 2013 average.
 
"The speculative market has moved from underweight gold at the start of 2014 to marginally overweight," says today's commodities note from South Africa's Standard Bank.
 
"This puts the latest rise in the prices of both gold and silver on a shaking footing," agrees Germany's Commerzbank, "and correction potential has built up.
 
Last week's data show speculators in Comex silver futures and options growing their net long position to a 17-month high, up $4.5 billion by value from the negative net silver betting of start-June – the first net bearish position held by speculators as a group since 2003.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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