On Monday so far, gold futures advance following data showing market participants expect prices for the precious metal to rebound in the coming weeks. Silver also trades in the green territory.
Gold for June delivery advanced $36.20, or $2.59%, to $1,431.80 an ounce during European and Asian trading hours. As the new trading week got underway, May silver also added 53 cents, or 2.29%, to $23.49 an ounce. Last week, the white metals’ prices fell nearly 13%, while gold lost 7%.
Gold climbed back above $1,400 last Friday – to $1,410 per ounce, still several times the lows of July 1999 of $252 per ounce. The metal started to climb in the ensuing years, gaining momentum through the mid 2000s and hitting records of over $1,900 an ounce in September 2011. Inflation is priced in all commodities.
At the close of Friday’s trading session, data from the Commodity Futures Trading Commission’s Commitments of Traders report showed managed money — which include hedge funds and commodity trading advisors — took advantage of the steep drop in gold prices to cut down their “short” bets, or bets that prices will go lower.
The report covered reportable positions among traders as of April 16, the date after gold futures suffered their biggest one-day decline since the 1980s.
The selloff in gold recently has apparently pushed up purchases of physical gold in the emerging and frontier markets, according to bullion dealers.
In addition, many traders say that the last weeks slump was driven by speculative actions.
Market analysts commented a number of factors have contributed to the drop in gold prices, including declines in gold holdings among exchange-traded funds, worries that central banks will start selling gold reserves, and revised on the downside gold price forecasts by a number of investment banks worldwide.
Goldman Sachs last Monday cut its 3-,6- and 12-month copper forecasts on the heels of a heavy selloff over the past two months, citing China concerns and bearish indicators. The forecasts were lowered to $7,500 per tonnes from $8,000 on a three-month basis, to $8,000 from $9,000 for six months and to $7,000 per tonnes from $8,000 for 12 months.
Elsewhere, RBC said on Friday it reduced its gold price forecast for the year to $1,450 an ounce from $1,700 an ounce previous. It cut its forecast for silver prices to $25.50 an ounce from $35 per ounce. It also noted it cut its target prices on North American gold producers by 30 per cent, and by 26 per cent on the top producers.
However, the longer term fundamentals of gold remain positive, given the elevated levels of global monetary easing, euro zone financial uncertainty and elevated levels of geopolitical risk in North Korea and the Middle East.
