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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

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