Steady support for gold intact


According to last week’s CFTC data, gold’s net speculative length remains largely unchanged w/w. The futures market positioning remains largely natural for gold. However, we still see gold’s bias to the upside on a 12-month basis. Last week, COMEX non-commercial longs in gold increased by13 tonnes, from 788 tonnes to 801 tonnes. The shorts have increased by a mere 2 tonnes, to 113 tonnes. The net non-commercial, or speculative position currently stands at
688 tonnes, still well below the 800 tonnes plus of Q3:10.

The speculative position as a percentage of open interest (OI) is at 31.8%, in line with the average level of 33% over the past two years. We believe that the current speculative length reflects gold’s range-bound trade ($1,400 to $1,450) over the past two months. While the futures market is not overly bullish on gold, the physical market is still a steady buyer of gold. This buying interest is not exceptionally strong but certainly persistent.

Also, the physical market is once again adjusting to a higher gold price — which we view as bullish. Before March, we were unlikely to see much buying above $1,400. Now, we see increased buying whenever gold dips towards $1,400. Tactically, we see good value in gold below $1,385. At the moment, gold looks overbought above $1,450. This trading range could well prevail for most of Q2:11 until seasonal jewellery demand improves in Q3:11. Our strategic view remains unchanged: we maintain that gold will push higher in 2011. We still target $1,500 for Q3:11.

Core to our strategic view on gold is global liquidity and real interest rates — we view these as the casual long-term drivers of gold. Real interest rates remain exceptionally low. As far as liquidity is concerned, we measure global liquidity as the Fed's balance sheet plus global FX reserve holdings. Therefore, if the Fed contracts its balance sheet by 5%, global liquidity declines by only 1.5%. Any decline in the Fed’s balance sheet is negative for gold. However, we also
note the other component in our measure of global liquidity — FX reserve holdings — is likely to grow as long as governments in major economies need to borrow. In fact, global FX reserve holdings are up 3.5% YTD. Our strategic view is unchanged: we believe that gold will
push higher in 2011 and we still target $1,500 for Q3:11.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

Gold Price Futures (GC) Technical Analysis – Trader Reaction to Minor 50% Level at $1954.80 Sets the Tone

Image
  Gold futures closed lower on Thursday but up from its low of the session as investors battled a number of factors including U.S. economic data and outside market influences. Earlier in the session, gold fell over 1%, as positive economic data elevated hopes for a quick recovery while dampening the investment appeal of the precious metal. On Thursday, December Comex gold futures settled at $1937.40, down $11.60 or -0.60%. On the data front, a drop in U.S. jobless claims reported Thursday and positive manufacturing data reported earlier in the week are taking some shine off gold. A weaker Euro is also weighing on dollar-denominated gold by driving up thU.S. Dollar Index. U.S. weekly jobless claims fell below 1 million last week for the second time since the pandemic started, but did not signal a strong recovery in the labor market because the drop largely reflected a change in the methodology used to address seasonal fluctuations in data. Earlier in the week, a report s
Read more

India, not Trump, is the real reason behind the crash in gold prices

Image
If you have been puzzled about the crash in gold prices after Donald Trump's election, you are in the company of almost every analyst and media outlet in the western world. Gold and silver are a major part of the research at The Arora Report. A combination of our proven precious metal algorithms, extensive resources and knowledge of the emerging markets led us to alert subscribers to The Arora Report early that gold was about to crash and the reason behind it. Immediately after the election, the net position of The Arora Report in gold, silver and miners has been short as part of a sophisticated strategy.
Read more