Gold Managed Funds Long Positions Back to the High of 2013
The U.S. Comex gold futures rallied for nine consecutive days and ended
at $1,324.40 on Tuesday. This is the longest rally since the summer of
2011. On Wednesday in Asia, the gold futures retreated about 0.7% to
$1,315 while the Dollar Index declined to a seven-week low to below 80.
The S&P 500 Index rallied 2.32% last week and was up 0.13% on
Tuesday. The S&P 500 Index is just eight points away from its
all-time high reached on 15 January this year. The Euro Stoxx 50 Index
is flat this week after rallying 2.65% last week. Emerging countries
stocks in dollar terms rebounded 4.6% from their low on 5 February. The
U.S. long bond yield rallied 4bp this week to 2.7069% on Tuesday.
Softer U.S. Data and Weaker Dollar
The January industrial production in the U.S. declined 0.3% compared to
an expected jump of 0.2% while the New York Fed Empire Manufacturing
Index in February fell to 4.48 from 12.51 in January. The advance
retail sales also fell 0.4% in January compared to 0.2% in December.
Softer data in the U.S. is consistent with a weaker Q4 GDP than the
preliminary estimate of 3.2%. The softer data, partly due to the bad
weather, will put downward pressure on the U.S. Dollar in the
short-term, which is positive for gold prices.
Trends and Investor Positioning
The World Gold Council (WGC) called 2013 the year of the consumer with
global consumer demand setting a record in 2013. Investment demand in
bars and coins reached 1,654 tonnes, the highest level since WGC’
statistics started in 1992. This is offset by a net outflow of 881
tonnes from gold-backed ETFs, resulting in an overall fall of 15% in
gold demand in 2013. China’s demand for jewellery, coins and bars
reached 1,065.8 tonnes compared to India’s 974.8 tonnes. The central
banks net bought gold for the fourth year although gold demand declined
to 369 tons, a 32% drop. The WGC highlighted the self-rebalancing
nature of gold and its role as a portfolio diversifier. The speculative
funds increased the net combined gold positions by 16.64% in the week
ending 11 February. This was led by a nine percent jump in the long
positions, which are close to the high in September 2013. Nevertheless,
the Fed Governor Yellen is expected to stick to tapering. A
longer-term boost to gold prices will need gold sentiment to turn and
investors decidedly re-establish long positions.
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19 Feb 2014 | Categories: Gold