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Gold Bullion Slips, Silver Sinks as Comex Bulls Retreat Ahead of Central-Bank Decisions

The PRICE of GOLD BULLION made its cheapest start to a week since mid-December on Monday as silver prices sank to 10-week lows after speculators in Comex futures and options cut their bullish betting once again ahead of a busy calendar for central bank meetings, economic data and geopolitics, writes Atsuko Whitehouse at BullionVault.
With the US Federal Reserve due to announce its next interest-rate move next week, gold prices in the US Dollar today dipped below $2020 in both Asian and then London trade. 
The yellow metal fell 1.3% last week in London's wholesale bullion market, marking the third consecutive week of decline from new record highs as political violence in the Middle East spread further, with Houthi attacks on Red Sea shipping boosting fears of inflation and crushing bets that the Fed will cut Dollar interest rates in March.
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"Precious metals continue to trade defensively as the markets adjust rate-cut expectations in the face of rather robust US economic data," says Nicky Shiels, head of metals strategy at Swiss bullion refining and finance group MKS Pamp.
US data published last week said retail sales in the world's largest economy increased more than expected in December, while the latest US weekly jobless claims dropped 16-month low.
"However," Shiels goes on, "asymmetric risks are building around positioning [in gold futures and options] as systematic and [commodity trading advisors] get shorter gold and other precious metals."
Chart of Managed Money speculators' net bullish position in Comex gold futures and options. Source: BullionVault
Latest data from US regulator the Commodities Futures Trading Commission (CFTC), covering the week ending 16 January, shows that hedge funds and other leveraged speculators in Comex gold futures and options reduced their net bullish position by more than 1/4 over the past two weeks.
This reduction brought that category of traders' net speculative position to the smallest since 14 November, a time when gold prices fell to the lowest point since mid-October's 7-month lows amid a series of 'higher for longer' vows from the US Fed and other major central banks over their interest-rate policies in the face of stubborn inflation. 
Speculators also cut their net bullish betting on silver prices, according to the CFTC data, reducing it by almost 2/3rds over 3 weeks.
The price of silver – primarily an industrial metal – sank by 3.7% on Monday to drop below $22 per Troy ounce for the first time since mid-November.
That decline pushed the Gold/Silver Ratio – which tracks the relative prices of these two formerly monetary metals – up further to 92, the highest value for gold versus silver in 16 months.
"Broad selling [has been seen across precious metal bets] as the Dollar strengthened and traders dialled back the timing of the first US rate cut," says derivatives platform Saxo Bank's commodity strategist Ole Hansen, adding that the Managed Money's net long in platinum futures and options was extinguished on last week's data to almost zero on concerns about China's economic growth.
Platinum, which finds two-thirds of its demand from industrial uses led by auto-catalysts, steadies on Monday around $900.
China's stock markets meantime plunged overnight, with the benchmark Shanghai Composite Index posting its biggest one-day drop since April 2022, down 2.7% as foreign investors continued to pull out of Chinese equities.
Bullion prices on the Shanghai Gold Exchange in contrast slipped only 0.3% to ¥479 per gram after setting new records last week, holding the premium over London quotes – signalling the incentive for new imports of the precious metal into its No.1 consumer market – at $49 per Troy ounce, over 5 times its historical average but slipping from last week's 2-month high.
Gold priced in Euros edged lower 0.1% to €1860 while the UK gold price in Pounds per ounce fell 0.3% to £1593.
The Bank of Japan will announce its first interest-rate decision of 2024 on Tuesday, followed by the European Central Bank on Thursday and with manufacturing-activity PMI reports due out for the US and Europe on Wednesday, plus US fourth-quarter GDP on Thursday, and then the key Personal Consumption Expenditure data – the Fed's preferred inflation indicator – on Friday.
Tuesday also brings the New Hampshire presidential primary, where former President Donald Trump hopes to extend his landslide victory from the Iowa caucus last week against former UN ambassador Nikki Haley for the Republican Party nomination.
Iran's President Ebrahim Raisi vowed on Sunday that Israel's attack on Damascus, which killed five Iranian military advisers, won't go unanswered
Pakistan and Iran restored diplomatic ties after last week's exchange of drone and missile strikes, while Israeli Prime Minister Benjamin Netanyahu rejected US, EU and UK calls to discuss the "two state" solution to Palestinian conflict as well as Hamas' proposals for releasing the remaining hostages held in Gaza following the terrorist group's 7th October atrocities in southern Israel.

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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