Commodities Price Trends and Dollar Strength Guiding Gold Prices
The U.S. Comex gold futures rebounded almost $20 this week to end at
$1,212.40 on Tuesday. The Dollar Index tumbled from 86.694 last Friday,
the highest level since June 2010, to 85.672 on Tuesday. The S&P
500 Index and the Euro Stoxx 50 Index declined 1.66% and 1.64%
respectively while the emerging market equities rebounded 1.40% this
week. The CRB Commodities Index also rebounded about 1.30% this week.
The U.S. ten-year government bond yield dropped about 10bp in the past
two days to 2.34%, the lowest level since the end of August. The
ten-year German Bund yield dropped 2bp to 0.905% this week.
Tumbling Euro and German Production
Last Friday’s stronger than expected U.S. September private payrolls of
248,000 and an unemployment rate of 5.9% caused the gold prices to
tumble to $1,192 and the Euro/Dollar to drop to 1.2516, the lowest level
since August 2012. The German industrial production in September of
-4% was the worst monthly decline since 2009, caused by falling factory
and new orders. The IMF further lowered its global economic growth
forecast in 2015 from 4% to 3.8% but raised the U.S. GDP growth to 2.2%
this year and 3.1% next year. The growth of Europe, Japan, Brazil, and
Russia are all lowered. Weaker growth projections have led to global
equities sell-off and a temporary bounce in the safe havens including
the U.S. Treasury and gold prices.
Investors Positioning and Commodities Prices Decline
The managed money net combined gold positions declined 15% to 37,743
contracts during the week ending 30 September, approaching this year’s
low. However, the weekly percentage rise in the short positions has
narrowed to 4.5% from the double-digit percentage weekly increase in the
past six weeks. With economic growth projections and commodities
prices falling and the Europe disinflation continuing, traders do not
have strong incentives to buy gold as an inflation hedge. The
commodities price trends and the dollar strength will provide short-term
guidance to the gold prices.
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