Comex Gold Bulls Cut Futures and Options Bets Ahead of US Election and Fed Rate Move
Monday, 11/04/2024 14:07
GOLD PRICES steadied above a 1-week low on Monday, trading 1.7% beneath last Thursday's record peak – reached despite speculators cutting their bullish bets on Comex gold futures and options – ahead of the US presidential election and Federal Reserve interest-rate decision,
writes Atsuko Whitehouse at BullionVault.
The spot gold price edged 0.3% higher by lunchtime in London from Friday's finish to trade at $2745 per Troy ounce, some $45 below its Halloween higher.
The US Dollar and US bond yields both fell, while crude oil jumped and global stock markets rallied from 1-month lows.
Prior to bullion setting
fresh all-time gold price highs on Wednesday and then Thursday last week, hedge funds and other leveraged speculators reduced their bullish betting and grew their bearish bets as a group in Comex gold futures and options, according to data from US regulators the CFTC.
Overall, that reduced the net long position of Managed Money traders for the 1st week in three, down by 2.0%. But it remained at what had been a 4-year high by size when reached in September – exceeding the 1-year average by more than 40% and nearly double the 5-year average – and it set a new record by notional value above $128 billion.
"Gold's record-breaking rally paused with a mini-correction unfolding ahead of this week's US elections," says derivatives platform Saxo Bank's commodity strategist Ole Hansen, citing Wednesday's "major risk event" of the White House result as the cause for last week's new all-time records even in the face of headwinds from
robust US economic data and rising bond yields.
Benchmark 10-year US Treasury yields retreated today as bond prices rallied, reversing 10 basis points of October's 48bps increase, the largest monthly rise since April.
Gold prices meanwhile rose 4.0% in Dollar terms last month, even as the US currency gained 3.2% on its trade-weighted index versus other major currencies, its steepest rise since April 2022.
"
Western investors are returning to the gold market," according to US investment bank Goldman Sachs, recommending gold as a hedge against potential geopolitical shocks, trade tensions, Federal Reserve rate cuts, and debt concerns.
"This
needs to continue to shift," says John Reade, market strategist at the mining industry's World Gold Council, because while "the last few years have really been dominated by emerging-market buying of gold – whether by central banks or in jewelry or bar and coin investment – those categories are beginning to slow down a bit.
"Western investors adding to their exchange-traded gold fund holdings in the third quarter, so that's a positive start. But the
physical coin and small investment bar market in the West still remains quiet. We need to see that improve for gold to trade sustainably higher I think."
Although the giant GLD
gold ETF saw shareholders cut their holdings by 0.4% on Friday, it grew 2.3% in October, marking the 4th consecutive month of inflows.
No. 2 gold ETF the IAU product meanwhile expanded by 0.2% last Friday after growing 2.7% across October, marking its 2nd consecutive monthly inflow.
With the Dollar retreating on the FX market on Monday, gold priced in Euros fell 0.6% to €2512 per Troy ounce while
the UK gold price in Pounds per ounce edged lower by 0.2% to £2112 – a drop capped by market expectations that the Bank of England will cut UK interest rates this week but make fewer cuts next year after forecasts suggested the new Labour government's first tax-borrow-and-spend Budget will push up inflation.
Markets also expect the Federal Reserve to cut US interest rates by 0.25% on Thursday, according to the
CME derivatives exchange's FedWatch Tool, the 2nd cut of this cycle but smaller than the 0.5% reduction made in September.
"The Fed cut is unlikely to trigger much movement in my view, as the bank is likely to signal further cuts in line with market expectations," says an analyst at Swiss bank and London bullion market-maker UBS.
"The driver for gold this week will be the US election."
Prices for silver, primarily an industrial metal, meanwhile dipped to a new 2-week low but then rose over 50 cents per ounce to $32.81.
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