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.
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.
Commodity gold traded below $1,800 an ounce as some investors sold the metal to lock in gains amid speculation the Federal Reserve may announce steps today to shore up the U.S. economy, eroding demand for a haven.
Immediate-delivery gold shed as much as 0.3 percent to $1,798.55 an ounce, and last traded at $1,801.15 at 10:08 a.m. Singapore time. The metal rose 1.4 percent yesterday, its biggest gain in eight days, on concern Europe’s debt crisis is worsening. It reached a record $1,921.15 an ounce on Sept. 6.
“Besides the debt crisis in Europe, one of the biggest drivers of the gold market is U.S. policy,” Yang Shandan, senior trader at Cinda Futures Co., said from Zhejiang, China. “The main concern in the U.S. is unemployment and they first need to fix that before worrying about the weakness of the dollar. We see some profit taking today before the Fed announcement.”
December-delivery bullion in New York lost as much as 0.5 percent to $1,800.20 before trading at $1,803.10 an ounce. The dollar was little changed against a six-currency basket after falling for the first day in three yesterday. The Dollar Index is down 2.6 percent this year as borrowing costs remained low.
Federal Reserve officials might propose new measures to galvanize the economy when the Federal Open Market Committee completes a two-day meeting. Ben S. Bernanke, the central bank’s chairman, told economists Sept. 9 in Minneapolis that policy makers have measures at hand and are “prepared to employ these tools as appropriate.”
Europe’s Crisis
In Europe, Greek Finance Minister Evangelos Venizelos made “good progress” in a second round of talks with the European Union and International Monetary Fund aimed at staving off default, the EU said in a statement late yesterday. Still, the International Monetary Fund cut its global growth estimate yesterday as “downside risks” from Europe and the U.S. grow.
“Gold is in a holding pattern at the moment, with strong buying support above $1,750,” said Yang, ranked second in a Futures Daily and Securities Times poll of China gold analysts. “We don’t rule out a test on the highs once the next wave of bad news hits.”
Cash silver traded little changed at $39.7325 an ounce. Spot platinum and palladium were also little changed at $1,776.93 an ounce and $716 an ounce respectively.
