Market Nuggets
Standard: Look For More Exodus From Losing Gold ETP Positions
Money has flowed out of gold-backed exchange-traded products this month, and there may be more of this from losing positions before gold prices can finally stabilize, says Suki Cooper, precious-metals analyst with Standard Chartered. ETPs trade like a stock but track the price of the commodity, with metal put into storage to back the shares. The amount of gold coming out of ETPs has reached 38 tonnes in August so far, swinging net year-to-date flows to an outflow of nine tonnes. “Around 188t of ETF holdings accumulated since the start of 2017 became loss-making when prices fell below 1,200/oz; loss-making positioning would rise to 223t if prices fell below 1,150/oz,” Cooper says. “Investors have chosen to liquidate unprofitable positions rather than average down; as a result, most of the loss-making positions will need to be flushed out before prices can stabilize.”
By Allen Sykora of Kitco News; asykora@kitco.com
RBC’s Gero: Bargain Hunting, Short Covering Lift Gold Prices
Monday August 20, 2018 09:48
Gold has bounced from its recent sell-off, drawing both bargain hunting and short covering, says George Gero, managing director with RBC Wealth Management. As of 9:16 a.m. EDT, Comex December gold was $9.10 higher to $1,193.30 an ounce. Last week, the contract had bottomed at $1,167.10, its weakest level since the beginning of 2017. Still, Gero says, there is potential for a “difficult week” for gold prices due to an expected Federal Reserve rate hike next month, plus stronger equities that means foreign investors have to buy U.S. dollars to pay for stocks (gold tends to move inversely to the dollar). “Traders [have found] it has been too easy to be short within a crowded trade as bear market in gold ensued soon after more dollar strength and tariffs were announced; however, event-driven rally or event-driven selling meets opposites very soon,” he says. A key for gold at the end of the week will be a speech from Fed Chair Jerome Powell at a Fed symposium in Jackson Hole, Gero adds.
By Allen Sykora of Kitco News; asykora@kitco.com
Standard Chartered: Gold Market Taking Direction From Currency Moves
Monday August 20, 2018 09:48
Currency movements remain the key driver for gold prices, says Standard Chartered. The metal tracks the U.S. dollar and Chinese yuan most closely, the bank says. Gold tends to move inversely to the U.S. currency, which has been strong lately. “Counter-intuitively, as risk aversion eases and the USD softens, gold prices are more likely to stabilize in the near term,” Standard says.
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