Gold News

Gold Price Bounces Amid Bearish Trading Ahead of Jackson Hole

GOLD PRICES rallied on Monday from a fresh 5-month low, reached after gold ETF holdings shrank again while speculators cut their bullish bets on the gold price to the smallest since before the collapse of Silicon Valley Bank in March, writes Atsuko Whitehouse at BullionVault. 
Ahead of this week's annual central banking gathering in Jackson Hole, Wyoming, and with world No.2 economy China again cutting its key interest rates today amid its worsening real-estate slump and debt defaults, gold priced in the Dollar rose $15 per Troy ounce to $1897 after hitting the lowest since mid-March during Asian trading overnight.
Giant gold-backed ETF the GLD shrank at the fastest pace last week since November, and latest data show that hedge funds and other speculative traders in Comex gold futures and options cut their bullish betting on gold for the 4th week running as a group in the week-ending 15 August.
With that group also growing its bearish betting for the 4th week in a row, up to the biggest since 7 March – just before the mini-crisis in US regional banking which took down Silicon Valley Bank among others – that pushed the net long position of Managed Money traders down by more than 1/3rd from a week earlier.
Reaching the notional equivalent of just 145 tonnes, the Managed Money's net speculative long position has shrunk by 315 tonnes from the recent peak in early May, back when the yellow metal traded up to gold's current all-time high of $2078 per ounce in spot-market trading.
Chart of Managed Money net speculative position in Comex gold futures and options. Source: BullionVault
"Speculative investors are getting out of gold and interest-rate expectations are a big factor here," says Bart Melek, head of commodity strategies at Canadian brokerage TD Securities. 
Following last week's 'hawkish' minutes from the US Federal Reserve's July rate rise, plus continued strength in US economic data, Fed officials will this week gather with policymakers from the European Central Bank, Bank of England and Bank of Japan for the annual Jackson Hole central banking symposium, with Fed Chair Jerome Powell speaking at 10am New York time on Friday.
Last year Powell's speech saw gold prices drop 1.2% as he bluntly stated that the Fed would focus on fighting inflation over its full-employment mandate and warned that rate cuts were not coming any time soon.
"Gold prices remain in a downward trending channel," says derivatives platform Saxo Bank's commodity strategist Ole Hansen, "with a 4th weekly decline in a row driven by rising yields and a stronger Dollar amid speculation the FOMC may have to hike rates further as incoming economic data points to continued price pressure."
Two-year US Treasury yields today rose again to 4.97% per annum, while the 10-year rate – a benchmark for government as well as many financial and commercial borrowing costs – edged higher to 4.29%, a fresh 16-year high. 
The Dollar index – a measure of the US currency's value versus its major peers – edged lower however after rising for 5 weeks to 2-month highs. 
Gold priced in Euros meantime fell 0.3% to €1732 while the UK gold price in Pounds per ounce edged lower 0.1% to £1482 – a new 2023 low – as both currencies strengthened against the US Dollar on the FX market.
Gold prices on the Shanghai Gold Exchange in contrast rose to a 1-month high at ¥457 per gram as the Yuan declined to 10-month lows against the US Dollar after the Chinese central bank again made a modest interest-rate cut.  
That pushed gold in Shanghai to a new historic premium to London quotes, topping $57 per ounce on Monday according to BullionVault's records.
Cutting China's 1-year loan prime rate (LPR) by 10 basis points to 3.45%, the People's Bank of China said it will "optimise" credit policies for the property sector, from where debt defaults are starting to spill over into the wider financial system, while "co-ordinating" financial support to resolve local government debt problems, in a statement on Sunday.
In contrast to the loosening financial policy by Beijing, traders on Monday continued to bet that the US Fed won't begin lowering the federal funds rate before May, according to the CME derivative exchange's FedWatch Tool.
European equity bourses rebounded from four successive days of losses on Monday as the region-wide Stoxx Europe 600 rose with rising global crude and gas prices, bolstering the value of energy companies. 
The price of silver, primarily an industrial metal, meanwhile climbed 1.7% to a 2-week high of $23.15 per ounce.

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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