Gold Trading During Risk-On, Risk-Off
After jumping 2.17% on Monday, the biggest percentage increase since
mid-December last year, the U.S. Comex gold futures declined 0.92% to
$1,337.90 on Tuesday as any immediate threat for Russia to invade
Ukraine has dissipated while the U.S. prepares to give a loan guarantee
of one billion dollars to Ukraine. The S&P 500 Index rallied 1.53%
on Tuesday after declining 0.74% on Monday. After suffering from the
biggest one-day drop of 3.02% since June last year, the Euro Stoxx Index
rebounded 2.7% on Tuesday. The geopolitical crisis in Ukraine has also
fuelled a rally in commodities - the CRB Commodities Index has climbed
in seven consecutive weeks and has jumped about 1.3% this week. The
Dollar Index has risen 0.6% in the past two days.
Some Good News from the U.S. and China
While the world has been focusing on the tension between Ukraine and
Russia and the economic losses incurred not only by Ukraine but also the
Russian economy and banks, the U.S. ISM manufacturing index rebounded
more than expected from 51.3 in January to 53.2 last month. The
Eurozone February flash manufacturing PMI expanded to 53.2 from 53 in
January. While China’s HSBC February manufacturing PMI dropped to a
seven-month low in February to 48.5, the Chinese government has just set
a growth target of 7.5% for 2014, signalling the government wants to
maintain growth stability and economic confidence while implementing
structural reforms. A moderately slowing China will continue to support
gold demand.
Momentum for Gold and Investor Positioning
According to Bloomberg, gold traders are now the most bullish in the
past 14 months. The gold-backed ETP holdings rose 6.8 metric tons in
February, the first monthly increase since December 2012. The managed
gold net combined positions jumped 25% during the week of 25 February.
This was led by a 38% decline in the combined short contracts. Since
the recent peak in December 2013, the net short contracts have declined
over 60%, reflecting the rising momentum of gold trading. Events this
week, which include the ECB meeting and the U.S. employment report, will
further make an impact on the market’s risk appetite as well as the
direction of the U.S. dollar and the gold prices.
This story is provided by Sharps Pixley, for more information and content please visit: www.SharpsPixley.com
05 Mar 2014 | Categories: Gold