Gold ETF’s are continuing to fall and the Fed is quite happy to see bond yields rise as a reflection of a more optimistic outlook. Rising yields are a natural drag on gold and as the US economy gets going those expectations of better times are only going to increase and put further pressure on gold. This is reflected in the bad start for gold around the start of this year. It has been one of the worse starts for 20 years. Usually, the start of the year is a strong time of demand for gold as the Chinese Lunar New year attracts gold buyers.
ETF demand just keeps falling
The bad start of the year for gold is also reflected in the falling ETF levels. Remember that gold ETFs tend to trend, funds have a lot to get rid of, and ETFs tend to have a decent impact on spot prices So, falling levels of exchange-traded funds impacts the gold prices. This is also in start contrast to the rise in gold ETFs that we saw last year which was instrumental in supporting gold prices.
From a seasonal perspective gold’s strong time of the year has passed. In the last 10 years, gold has been flat between April and June, but there are definitely bearish factors above that can weigh on prices. So, taking a balance off factors would mean it is sensible to look for key areas to short gold from as long as these factors remain.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure. *Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise. Without the approval of HYCM, reproduction or redistribution of this information isn’t permitted.