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Gold investors are changing their trading pattern as gold price approaches $2,000

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(Kitco News) Trading behavior is changing in the gold space with investors preferring physical versus paper while at the same time investing more in ETFs than futures, according to Commerzbank.

Traders issued the largest delivery notice on record at Comex, declaring their intent to deliver 3.27 million ounces of gold against the August Comex contract.  

“According to traders, 102 tons of gold were delivered to the holders of expiring gold future contracts on the Comex last Thursday – this also fits the picture of changed investor behavior,” said Commerzbank analyst Carsten Fritsch. “Physical deliveries on the Comex have been rising for months: they totaled just 26 tons in February, 98 tons in April and as much as 171 tons in June.”

This trading pattern shows that investors prefer physical to paper gold, Fritsch pointed out. 

Despite the want for physical, no shortages are expected, the analyst added. “Still more gold is being shipped into the COMEX warehouses than delivered on a net basis. Currently over 1,100 tons of gold are being stored there, so no shortages of standard bars are to be expected, even if investor demand remains high,” he said. 

Another shift in the trading pattern has been investors’ preference for gold ETFs versus future contracts, according to Commerzbank. 

“Clearly there has been a shift in investor preferences: rather than investing in futures contracts, they are opting to put their money in gold ETFs,” said Fritsch.

Massive inflows are the proof with 155 tons, which is half of monthly global mine production being reported in July alone, the analyst said, citing Bloomberg data. 

In contrast, speculative interest in gold remains low in comparison to the record-high prices gold is seeing. 

“Net long positions held by speculative investors even plunged by 16.5% to only around 117,000 contracts in the last reporting week. They have almost dropped back to their low level of early June, in other words,” Fritsch said. “This is all the more remarkable given that the gold price had reached what at the time was a new record high of $1,980 at the end of the reporting week.”

In the meantime, gold prices are getting ready to tackle the $2,000 an ounce level after some profit-taking. 

Gold hit new record highs early on Monday, which was followed by a slight pullback. At the time of writing, December Comex gold futures were trading at $1,983.70, down 0.11% on the day.

The $2,000 an ounce is still being viewed as inevitable. 

“The gold price began the new week of trading in the same way that it ended last week, namely at a new record high. This was achieved in early Asian trading at just shy of $1,990 per troy ounce. The gold price in euros likewise climbed to a new all-time high of just under €1,690 per troy ounce this morning. Even though the price has meanwhile dropped by approx. $20, it is only a question of time before it makes a renewed bid for the magic $2,000 mark,” noted Fritsch.

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