How gold has managed to stick to $1,200 despite fund exodus

By Rupert Rowling

Gold is sticking to a narrow trading range around $1,200 an ounce even after holdings in bullion-backed exchange-traded funds plunged to their lowest in a year.

Bullion for immediate delivery was 0.2 percent lower at $1,199.24 an ounce as of 10:43 a.m. in New York. In the last month, gold has traded within a range of about $31, with a high of $1,214.35 and low of $1,182.86.

The metal is “continuing its slow dance around $1,200,” Carlo Alberto De Casa, chief analyst at London-based brokerage ActivTrades, said in a daily note.

A slide in bullion-backed ETFs hasn’t been enough to move the metal out of the recent range. Assets dropped to 2,103.6 metric tons, the lowest since Sept. 20, according to data compiled by Bloomberg.

Earlier this month, hedge funds and other large speculators built up the biggest-ever net-short position in futures and options, according to U.S. Commodity Futures Trading Commission figures going back to 2006. The most recent data, for the week through Sept. 11, showed only a small reduction in net-bearish bets.


“Gold has remained range-bound around $1,200 for the past month, during which time it has managed to absorb continued selling from futures and ETF investors,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “It does indicate that some underlying demand has begun to emerge, but in order for the price to progress to a point where short sellers begin to worry, it needs additional support from a combination of a weaker dollar and lower stocks.”

Gold has struggled to find traction for much of the year, with investors favoring the dollar as a haven asset. The dollar’s strength since late April in particular has held back any potential advances in the gold price despite potential triggers ranging from political uncertainty in Europe and the expanding global trade tensions.

Still, traders and analysts of the precious metal have held a majority bullish outlook for the last four weeks, according to Bloomberg’s weekly survey.

In other precious metals:
Silver trades little changed, while platinum and palladium advance.


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