FS: US GOLD – Comex gold falls as long-time bulls exit the market
Destin, Florida 02/04/2013 – Gold futures sold off sharply on Tuesday following another sizable reduction in exchange-traded fund (ETF) holdings and the release of a bearish Societé Generale report titled ”The End Of The Gold Era.”
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $18.50 at $1,582.4.00 an ounce with the bulk of the losses occurring near the US open.
“The markets were nervy going into New York trade. There’s a belief, which is backed up by hard data, that investment demand is drying up and may not return anytime soon,” said a US-based gold trader, who noted that holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 4.21 tonnes yesterday to an eight-month low of 1,215.05 tonnes.
“There are warships just off the Korean peninsula and another damning Europe unemployment report this morning – yet gold is falling like a rock,” the trader said.
The bear case was elucidated by SocGen, which forecast that gold prices will average just $1,500 in 2013 and will gradually fall to $1,375 by the end of the year.
“The gold price is, in our view, in bubble territory. Investors have pushed the gold price sharply higher over the past 10 years with the past five-year rally driven by fears that aggressive central bank QE would lead to very high inflation. But inflation has so far stayed low and now we are beginning to see: economic conditions that would justify an end to the Fed’s QE; fiscal stabilisation that has passed its inflection point; and a US dollar that has begun trending higher,” the SocGen report said.
“It seems unlikely that investors would want to add much to their long gold positions in this context. If so, the gold price would trend lower at pace as the physical gold market is seriously oversupplied without continued large-scale investor buying,” the report added.
Meanwhile, in the wider-markets, the euro was near unchanged at 1.2818 against the dollar, while the Dow Jones industrial average and S&P 500 were up 0.53 percent and 0.52 percent respectively. Germany’s DAX and France’s CAC-40 were up 1.22 percent and 1.21 percent respectively.
“Undermining gold prices to start today, is a positive ‘risk-on’ tilt in some global equity markets, and somewhat negative analyst dialogue toward gold shares overnight,” the CME Group said in a market commentary.
“Fears of slowing physical demand were also seen in the news overnight, perhaps in the wake of slack eurozone economic news and perhaps because of somewhat disappointing economic news from the US yesterday,” CME added.
As for the more industrial commodities, light sweet crude (WTI) oil futures for May delivery on the Nymex were down 63 cents at $96.44 per barrel and the most-actively traded Comex copper contract was at $3.3665 per pound, down 0.8 cents.
Comex silver for May delivery was down 46.9 cents at $27.475 an ounce. Trade has ranged from $27.425 to $28.140.
“Silver remains weak and we would not be surprised if the metal tests the lows of last year, at $26.16, soon. We prefer to sell silver into rallies,” Standard Bank said in a note.
Platinum futures for July delivery were down $16.10 at $1,582.70 an ounce and the June palladium contract was at $771.95 an ounce down $12.00.
