Steadier Gold Prices as Short Gold Positions Fall

The U.S. Comex gold futures rose 1.02% last week and stabilized at around $1,197 level on Tuesday. Year-to-date, the gold futures have fallen 0.43% while the Dollar Index has risen almost ten percent. The S&P 500 Index reached a new high on Monday, rising 2.63% in November. The Euro Stoxx 50 Index has risen one percent in the past two days after surging 4.39% last week. The U.S. ten-year government bond yield finished at 2.257% on Tuesday while the ten-year German Bund yield touched 0.747% and the Spanish ten-year government bond yield reached 1.915%. The crude oil futures plunged over three percent this week to $74.09 on Tuesday in anticipation of the OPEC meeting on 27 November.

Mixed Economic Performances

On Tuesday, the U.S. reported a revised Q3 GDP of 3.9% versus the earlier reported 3.5% due to an improvement in consumer spending and business investment. However, the November consumer confidence index surprisingly fell to a five-month low at 88.7 versus an expected 96, showing that the consumers were less optimistic about the labour market outlook and the business environment. In Germany, the Q3 GDP climbed 0.1%, better than the 0.1% contraction during Q2. The ECB is contemplating buying sovereign bonds to stem deflation and boost growth. In China, the central bank surprised the market by cutting interest rates asymmetrically, lowering the lending rate by 40bp to 5.6% while cutting the deposit rate by 25bp to 2.75%. The banks can now pay up to 120% of the deposit rate benchmark. This will help boost the funding for companies and yet protect the consumer savings.

Investor Positioning

The managed money net combined gold positions have jumped 55.9% to 60,307 contracts during the week ending 18 November, led by a 16.3% reduction in the short positions. According to the Swiss trade data, the October gold shipment to India rose to 75 tonnes from 58.4 tonnes in September while that for China rose to 13 tonnes from 42.5 tonnes. The gold imports from Hong Kong into China rose for three consecutive months due to the higher jewellery demand offsetting the weaker investment demand. The investors await the outcome of the Swiss Gold referendum at the end of the week.