Gold Prices Dipped but Still Within the Range
After declining 0.36% last week, the U.S. Comex gold futures fell 0.73%
this week to $1,295.90 on Tuesday while the Dollar Index rallied 0.56%
this week to 81.883. The S&P 500 Index jumped 1.36% in the past two
days while the Euro Stoxx 50 Index surged 1.90%. After dipping to as
low as 2.3011% intra-day last Friday, the U.S. ten-year government bond
yield settled at 2.401% on Tuesday. The German ten-year Bund yield also
fell to 0.9489% during Friday and ended at 1.001% on Tuesday. The
crude oil futures tumbled 2.52% this week to $94.90 on Tuesday after
dropping 0.31% last week.
U.S. Economic Data not Helping Gold
With the U.S. July yearly housing starts coming in at 15.7% after a fall
of 9.3% in June and the July month-on-month CPI being 0.1% (2.0%
year-on-year), suggesting stronger growth with little inflation, gold
prices have little to cheer about. Crude oil futures, despite the
fighting in Iraq, have fallen almost 12% since the end of June. Ukraine
has strengthened its foothold against the rebels in the East, and the
German Chancellor will meet with the President of Ukraine to try to ease
the conflicts, lowering the safe-haven bid for gold. Investors and
traders will look forward to the central bankers’ speeches at the
Jackson Hole Economic Symposium this weekend on monetary policy and the
labour markets.
Traders Closing Shorts
The managed money net combined positions in gold have jumped 28.43%
during the week ending 12 August to 133,708 contracts as the short
positions have tumbled 36.23% to 20,808 contracts. In fact, the total
combined (commercial and non-commercial) short gold contracts were near
the level in September 2009 when gold prices were below $1,000.
Barclays pointed out that the low level of shorts underscores the
fragility of prices. Nevertheless, physical demand, while not strong,
is expected to pick up next quarter as the Indian wedding and festival
season arrives. The central banks, especially the emerging countries,
remain steady buyers with the net central bank gold purchases up nine
percent year-on-year during H1.
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20 Aug 2014 | Categories: Gold
