A Cautious Gold Rally
The U.S. Comex gold futures kicked off the year with a 3.14% gain during January. The prices fell 1.91% last week after rising for five consecutive weeks. This week, the gold futures rebounded 0.89% albeit with some volatilities as equities have rebounded on Tuesday. After falling for three weeks and declining five percent year-to-date, the S&P 500 Index plunged 2.28% on Monday but rebounded 0.76% on Tuesday. The Euro Stoxx 50 Index fell for two consecutive weeks and plunged again this week by 1.71%. The Dollar Index dropped slightly by 0.23% in the past two days. The unexpected winner is the U.S. 10-year government bond yield, which has rallied 40bp this year to 2.6294% on Tuesday.
Ongoing Global Expansion Despite Equities Slump
While
China started off the week with the January official manufacturing PMI
at 50.5, a six-month low, and a worsening services PMI at 53.4, the
January global PMI remained steady at 52.9, just slightly down from 53
in December. The Eurozone final manufacturing PMI was higher than
expected in January. The U.S. ISM fell in January to the lowest level
since May 2013 due mainly to the horrendous weather conditions. The
Japan manufacturing PMI has risen six months in a row. While some
economists are already revising down the U.S. GDP growth estimates due
to the weaker economic survey, many still expect the Fed to continue to
taper given the ongoing broader recovery. A rebound in the stocks with
supportive economic growth can dampen the gold price rally going
forward.
Investors Demand and Positioning
According
to the CFTC, the net combined managed money gold positions rallied 40%
during the week ending 28 January led by a 16% reduction of the short
positions and a five percent increase in the long positions. The U.S.
Mint sold over 91,000 ounces of gold coins in January, a nine-month
high. However, the Shanghai Gold Exchange volume has already tapered as
the Chinese are enjoying their week-long New Year holiday. The client
net gold buying index tracked by London-based BullionVault fell to an
18-month low last month as equities have been rallying. Any surprises
concerning this Friday’s non-farm payrolls will also move the gold
prices.
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05 Feb 2014 | Categories: Gold
