Gold Mining Stock Gain, Traders Report Speculative Fell

Gold mining stocks were gaining ground Monday. Barrick Gold(ABX) was rising 2.6% to $47.85 while Newmont Mining(NEM) was gaining 2.8% at $64.91. Other gold stocks, AngolGold Ashanti(AU) and Goldcorp(GG) were moving higher at $41.12 and $47.58 respectively.

According to the latest commitment of traders report for the week ending October 4th, speculative short positions fell 12%, which signals gold's recent rally could be short covering as well as bargain hunting. Commerzbank also says that speculative net long positions fell for the sixth time in the past seven weeks, but the pace has slowed considerably. "This could indicate that the correction in the futures market is largely completed and that pressure on prices from this side is easing."

Any kind of correction in the stock market, however, could trigger profit taking in gold as traders need liquidity. "The level of net long positions is still significantly higher than after the correction of autumn 2008," wrote Commerzbank, "we therefore anticipate a risk of another downward movement in the gold price if the equity markets come under renewed pressure."

There are still enough looming macro questions that gold prices could continue to be underpinned by safe haven buying. Although Eurozone leaders have committed to coming up with a plan to shore up European banks, detail are scarce and each country has its own agenda.

Merkel wants the European Financial Stability Fund, or EFSF, to be a lender of last resort after private and government funding. Sarkozy wants the EFSF to backstop banks before governments in order to protect France's triple A credit rating. The whisper commentary, on the other hand, is that the European Central Bank might be forced to print more money to then lend to banks a bullish sign for gold.

"Heightened uncertainty over the state of the global economy, and Europe in particular," argues Barclays, "provide a gold-fertile backdrop and we retain our positive view on gold." Barclays sees $1,875 an ounce gold prices in the fourth quarter and a 2012 annual average of $2,000 an ounce.

Category: Gold, gold mining, gold stock, gold trading, mining commodity, mining stock trading, speculation gold