CHART: With gold price at 8-week low, bulls need a Trump intervention

US president's irrational behaviour and ill-considered remarks "have proved supportive in the past."

Gold drifted lower on Tuesday touching an eight-week low of $1,271 an ounce in subdued afternoon trade. The metal is now trading more than $80 below its 2017 peak hit early September.

Adding to the list of geopolitical hot spots (apart from North Korea) we now have European political uncertainty following the Catalan referendum and Middle East concerns following the Kurdish vote for independence in Northern Iraq

Fading geopolitical tensions, a stronger dollar and higher yields on US bonds are being blamed for the softness. Large-scale investors are pulling money from the gold market in favour of equities which are once again setting new highs thanks to renewed optimism about the possibility of a huge tax cut in the US.

In the run-up to gold’s intra-day high of $1,362 on September 8, hedge funds speculating in gold futures and options built up long positions – bets on a rising price – for nine straight weeks.

At the time among money managers, gold price bulls vastly outnumbered bears with the ratio between long and short futures positions on the Comex market in New York reaching a five-year high at 20 longs per 1 short. That ratio is now back to 10 as money managers cut back bullish positions across the precious metals complex.

While speculators are looking elsewhere for action, retail investors in gold (and some hedge funds) continued to pour money into gold-backed ETFs. Vaults now hold around 2,155 tonnes after three straight quarter of net inflows.

US president Trump’s actions and geopolitical worries coming back to the fore could determine where gold finds support argues Ole Hansen, chief commodity strategist at Saxo Bank in another trenchant note from www.TradingFloor.com:

Trump's rating recovered following last month's deal on the debt ceiling and the Harvey/Irma response. However the late Puerto Rico response, accusations of tax reform tailored to the rich, and now the potential of a new gun control debate have seen the administration's ratings slide once again. With that comes the risk of irrational behavior and ill-considered remarks – factors that have proved supportive in the past.

Adding to the list of geopolitical hot spots (apart from North Korea) we now have European political uncertainty following the Catalan referendum and Middle East concerns following the Kurdish vote for independence in Northern Iraq.

CHART: Retail investors keep the faith as gold price sinks to 8-week low


 

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