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Gold Pushed and Pulled by Central Bank Actions, Physical and Investors Flow

The U.S. Comex gold futures fell 0.43 percent this week to $1,377 on Tuesday after trading as high as $1,423 on 6 June. The Dollar Index fell to 81.034 on 11 June after plunging 2.05 percent last week. The S&P 500 index and the Euro Stoxx 50 index fell 1.05 percent and 1.50 percent respectively in the past two days. Emerging markets equities were harder hit, falling 2.68 percent in the same period. The Japanese Yen surged 1.59 percent while the Euro Dollar rose 0.71 percent against the U.S. Dollar this week.

Concerns about Central Bank Policies
Investors are preoccupied by what the global central banks’ next moves will be. The U.S. May payrolls rose 175,000 versus 149,000 in April while the May unemployment rate climbed 0.1 percent to 7.6 percent. The more positive data cheered the stock market and added to the expectation that the Fed would taper its QE programme sooner than expected. The Bank of Japan governor recently said that he did not see the need to add more stimulus measures or additional tools to calm down the bond market. The BOJ will stay pat to increase the monetary base by 60 to 70 trillion yen a year as well as provide a one-year fixed rate loan to the private sector. The BOJ recently also revised up its economic growth assessment from 0.9 percent in Q1 to 1.0 percent. Global stocks and gold have priced in more central bank stimulus actions although the policy makers are unlikely to do more in the short-term.

Investors’ Positioning in Gold
The net combined positions in gold by speculators rose 17.5 percent for the week ending 4 June after reaching a four-and-a-half year low on 28 May. The short positions fell for the first time since mid-April. According to Bloomberg, the gold-backed ETP holdings fell to a two-year low of 2,127 metric tons as of 11 June. Barclays expects that while physical demand from Asia remains healthy, the ETP net redemptions will likely outpace the physical demand for gold.

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12 Jun 2013 | Categories: Gold

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