Big Speculators Cut while Physical Holders Added Gold
After inching up 0.15 percent last week, the U.S. Comex gold futures
jumped 3.72 percent this week and ended at $1,361.10 on Thursday.
During Asia Friday morning, the gold futures traded as high as $1,372.
The Dollar Index retreated 0.72 percent in the past two days and was
flat week-to-Thursday. The S&P 500 Index and the Euro Stoxx 50
Index fell 1.94 percent and 0.20 percent respectively in the past two
days. Bond yields in major countries around the world have reached a
one-month high according to Bloomberg. The U.S. 10-year government bond
yield was as low as 1.63 percent on 2 May but reached 2.77 percent
during Asia Friday morning.
Gold’s Correlation with Stocks Turned Negative
The most recent U.S. weekly jobless claims declined to 320,000, the
lowest level since October 2007. As the concern of the Fed’s QE
tapering mounts, bond yields around the world surge. Weaker earnings
reports in the U.S. and increasing violence out of Egypt have hurt
global stock markets in the past two days. The stock investors are not
much cheered by the end of the Euro region recession, with the Q2 GDP
rising 0.3 percent. Gold has reasserted itself as the alternative asset
to bonds and stocks. In fact, since the gold price has bottomed at the
end of June, the daily correlation between the gold price and the
S&P 500 index has turned negative. Since the recent trough on 27
June, the gold futures rebounded 12.34 percent while the S&P 500
Index only climbed 3.29 percent, reflecting the market’s perception of
the value in gold.
The Two Stories of Gold
Filings show that John Paulson, the big gold investor, sold over half of
his gold ETF positions during Q2 while other hedge fund managers
including George Soros and Daniel Loeb got rid of their gold ETF
positions. On the other hand, the World Gold Council reported that
consumers purchased 1,083.2 tons of gold in Q2, a jump of 53 percent
over the year. Gold bar and coin purchases jumped to a record while
jewellery demand reached the highest level since 2008 as buyers saw the
value of gold after the price plunge. The overall demand in gold
dropped 12 percent to 856.3 tons in Q2, led by the 400 tons of ETFs
selling by speculators and investors. Bloomberg reported that traders
are most bullish since 8 March about gold prices next week.
What to Watch
We will monitor the July U.S. housing starts and building permits on
Friday. The highlights next week will be the July FOMC minutes release
and the July U.S. existing home sales on 21 August as well as the August
flash PMI from China, the E17 and the U.S. on 22 August.
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16 Aug 2013 | Categories: Gold
