January concluded with the tallying of gold’s poorest “start” to a trading year, since…1997. Amid slumping prices (bullion fell by over 8% during the month) and a rising appetite for other, perhaps higher-yielding assets, gold balances in the largest gold-backed ETF decline by over 53 tonnes last month, making for the second-largest such loss in bar holdings since the investment vehicle was launched in late 2004. On Monday, the trend towards lightening up on hitherto substantial gold positions continued, with global ETP products shedding a further 2.61 tonnes of the yellow metal, bringing the aggregate holdings down to the 2,031 tonne mark – some 83 tonnes fewer than had been tallied at the pinnacle reached in such balances in December.
Hedge funds as well as money managers continued to reduce their bets on higher bullion price in January, to the extent that by the 25th, the cumulative net-long market position fell to 129,664 contracts on Comex. That would be the lowest such net-long commitment level since May of 2009, according to the CFTC’s most recently available contract data.
As of the first trading day of February, gold continued to exhibit some of the same nervousness that has characterized the sessions of the past week. Bullion is hardly responding to the on-going instability in Egypt, and – despite further slippage in the US dollar – is tilting towards lower levels as further US economic data releases remain less than conducive to piling on bullish bets for bullion at this juncture.
Do note that the Dow had – in precise contrast to gold – its best showing for a January since…1997 last month. More than a 2.7% gain in the leading equity market index was tallied in January. “Effect” or not “effect” the early pop in stock values may be a harbinger of trends to come. The principal catalyst for such gains was the detail available for parsing in the month’s economic data releases. Meanwhile, copper prices, apparently taking a cue from the same factors the Dow was paying attention to, rose to a new all-time high of $9,878 and showed no signs of the hesitation manifest in gold.
Spot gold dealings on Tuesday had to contend with prices meandering within the $1,324-$1,342 channel and participants were perhaps more mindful of the decline in open interest (some 103,000 contracts lost since the 3rd of January) than on the fluid and still-developing Egyptian situation. Potential corrective upward bounces notwithstanding, the school of thought that subscribes to the view that the overall correction in gold is not yet over (targets of $1,280.00 keep popping up with regularity) is still attracting pupils sporting technical charts that feature circled tops in gold that bear various exotic names.