GOLD TRADING in London’s wholesale market on Monday held prices near Friday’s 3-week Dollar highs around $1080 per ounce, hit on what analysts agreed was a dash to “short covering” by bearish traders in US futures and options contracts.
Latest data gathered by US regulator the CFTC put the net positioning of ‘managed money’ traders at a negative record for the 10-year series as of last Tuesday, with bearish bets amongst hedge funds and other speculative players outweighing their bullish bets by more than 55 notional tonnes.
Across the entire Comex gold derivatives market, trading in gold futures and options saw non-commercial players holding the smallest “net spec long” position since November 2003, with that group’s bearish betting growing to its largest size since this summer’s all-time record highs.
“If the Dollar is unable to rally,” says a gold trading note from Swiss refiner and finance group MKS, “we may see further squeezes towards $1095-1100 in the short term leading into next week’s FOMC meeting.”
Adding that Thursday’s “Harami candle reversal warning
has been confirmed,” London market-maker and Canada-owned bullion bank Scotia Mocatta’s latest chart analysis agrees that the “next key technical level is seen at 1095…followed by the 38.2% retracement [of the October to December slump] at $1104.”
Trading volume in the Shanghai Gold Exchange’s main gold contract today jumped to its heaviest level
since August’s records, with the Yuan price closing at 1-month highs.
Shanghai gold’s premium to equivalent London quotes held better than $3.10, well above the last 12 months’ average incentive to new imports of $2.45 per ounce.
Gold trading in would-be Asian hub Singapore, in contrast, has proven so weak that a 25-kilo contract announced to much fanfare last year is being re-launched
Fewer than 8 tonnes of bullion have been traded via the Singapore Exchange Ltd’s gold contract since October 2014, the SPX said Monday.
China’s main SGE contract traded over 60 tonnes today alone.
“Precious metals have been sold in the futures markets over the past couple of weeks,” says a note from Swiss private bank Julius Baer, “[but] we believe these positions have now been bought back in order to take profits.
With next week’s US interest-rate rise now taken for granted, the “muted inflation outlook [means] gold should remain out of favour among investors,” the bank says, cutting its end-2016 price forecast to $1000 per ounce.
Looking at Friday’s fresh drop in US energy prices after the Opec oil cartel failed to cut its production quotas, “Low oil prices suggest further downward pressure on inflation measures,” agrees Japanese conglomerate Mitsubishi’s analyst in London, Jonathan Butler.
But “while low inflation is not usually supportive of prices,” Butler says, it will likely curb the rate of US Fed interest hikes, “imply[ing] a fairly benign environment for precious metals into 2016.”
Silver trading in Asia and London on Monday also saw prices hold onto Friday’s jump, with Dollar prices keeping 1-month highs above $14.50 per ounce.