logo
  Join        Login             Stock Quote

Bad News Good For Gold

 January 31, 2013 02:56 PM


(By Mani) Gold jumped $15 with considerable ease after US Q4 GDP came in at -0.1 percent Wednesday, well shy of market expectations for 1.1 percent, underscoring yet again the yellow metal's heightened sensitivity to negative US data.

The gold market did not factor in negative surprises from the US, both in terms of positioning and sentiment. Gold further benefited from dollar weakness after the Fed gave no indication of any shift in policy, which likely disappointed those who had interpreted the December FOMC meeting minutes as hawkish.

"So, despite US Treasury 10y yields continuing to hold near recent highs, gold is keeping the bulk of its gains for now," UBS strategist Edel Tully wrote in a client note.

Confirmation that the Fed will stay the course in terms of monetary policy is reassuring. However, the intense focus on employment means that this Friday's report remains crucial in forming market expectations on future policy.

[Related -Perfect Storm Driving Gold Higher]

Given the price action, some adjustments to positioning are likely to emerge heading into tomorrow's employment report. Overall, the gold market should resume subdued trading as is typical ahead of a key event.

Open interest on Comex fell by 3.08 million ounces (moz) from Jan. 22 to Jan. 29, likely reflecting long liquidation. The COTR on Friday should provide clarity on the reduction in net speculative length amid the past week's selloff, although the report would exclude the impact of yesterday's bounce.

"For if we get another negative surprise in US data, the resulting push higher in gold would necessarily be amplified by those shorts getting squeezed," Tully said.

[Related -SPDR Gold Trust (ETF) (GLD): 3T Analysis: Target $1,400 but Box Bound]

While the resilience in US yields is suppressing gold's upside potential for now, a softer employment number would be enough reason for gold to overlook this detail.

On the physical side, demand remains steady. Interest in China is picking up on Lunar New Year-related appetite. In India, the rupee's strength helped offset the uptick in gold priced in dollars

In the week to Jan 30, gold ETF holdings fell by 0.22moz to 88.11moz. Investors cut their holdings from the SPDR fund by 194koz and the ZKB fund by 53koz. The Source fund was down by 13koz. On the other hand, the ETFS (LSE) fund gained 20koz. Total ETF holdings are down 0.71moz, month-to-date.

In addition, silver ETF holdings slipped 8.48moz to 546.30moz. Investors liquidated their iShares holdings by 7931koz, ZKB holdings by 545koz and ETFS (NYSE) holdings by 99koz. In contrast, they extended their holdings in the ETFS (LSE) fund by 93koz.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageIntel Corporation (INTC): Analysts believe PC Replacement Cycle Will Stretch Valuation Metrics

Intel Corporation (NASDAQ:INTC) rocked on Humpday thanks to better than expected earnings, forward guidance read on...

article imageSanDisk Corporation (SNDK) Q2 Earnings Preview: Beat and Pop

SanDisk Corporation (NASDAQ:SNDK) will host a conference call Wednesday, Jul. 16, 2014 at 2 p.m., Pacific, read on...

article imageAtwood Oceanics, Inc. (ATW) and ENSCO PLC (ESV): Kick the Tire Time Say BMO

It is time to think about buying offshore drillers so says BMO Capital Markets analysts Alan Laws and read on...

article imageeBay Inc. (EBAY) Q2 Earnings Preview: Cyberattacking Earnings?

eBay Inc. (NASDAQ:EBAY) will release its financial results for the second quarter of 2014 after the market read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.