FS: US GOLD OPEN – Comex struggles to bounce higher
Orlando, Florida 23/04/2013 – Gold traders are now fairly confident that a bottom has been established but the rebound from the lows of the sell-off has stalled – the boost in physical demand can only take prices so high.
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $3.40 at $1,417.80 per ounce. Trade has ranged from $1.409.70 to $1,432.80.
“We are convinced that the lows were seen last week for gold/yen and that perhaps the lows had been seen for gold/dollar, but we also said that we were fearful that the rally from last week’s lows might well have seen its high for the interim when gold/dollar rose to $1,439 yesterday for a few brief moments,” Dennis Gartman, editor of the Gartman Letter, said.
“The problem that we see with the gold market is that there are still a large number of public longs still holding to their positions, hoping to be bailed out and history has a very ill way of dashing those hopes badly upon the rocks,” he added.
Meanwhile, Goldman Sachs has closed its recommendation to short Comex gold after price moved above $1,400, locking in huge profits; nevertheless, the US investment bank still believes the metal faces major headwinds over the next several years.
The firm looked incredibly smart when it dramatically cut its gold price forecast just days before the bottom fell of out the market. Its three-month price target for gold remains $1,530 while its six-month prediction is $1,490 and its 12-month is $1,390.
“We have exited the trade significantly below our original target of $1,450 for a potential gain of 10.4 percent,” Goldman Sachs wrote in a note. “The move since the initiation was surprisingly rapid [and was probably] exacerbated by the break of well-flagged technical levels.”
“Our bias is to expect further declines in gold prices on the combination of continued ETF outflows as conviction in holding gold continues to wane as well as our economists’ forecast for a re-acceleration in US growth later this year,” the firm added.
The rally in gold over the past week has been spurred on by stronger retail buying in China, India and other emerging markets. Shanghai’s gold price premium jumps to $17 per ounce from $2 a day earlier and volume doubled to 43 tonnes from a week earlier, HSBC’s James Steel said.
“In the past five trading days, gold prices generally increased during the early session, in the Asian hours, only to be met with selling in the later session, during US hours,” Steel said.
“Currently, the pace of selling during the US sessions is showing signs of slackening, which may indicate a lack of investor conviction for further price weakness. This leaves us positive on bullion prices for the near-term,” he added.
Nevertheless, paper investors remain cautions, with outflows from exchange-traded funds (ETFs) continuing at a rapid pace. Net holding in the ETFs followed by FastMarkets dropped a further 19.5 tonnes on Monday to 2,321 tonnes – they have now fallen around 320 tonnes from the record total from late last year. Holdings have fallen 72.8 tonnes or three percent in the past six sessions.
In data, China’ HSBC Flash Manufacturing PMI for April came in at 50.5, below the forecast of 51.4 and a drop from the March reading of 51.6, although a result above 50 still indicates continued expansion.
“Economic activity in China thus appears to be relatively subdued in the current month too, which is likely to preclude any noticeable recovery in metal prices in the near future,” broker Commerzbank said.
The April Flash Manufacturing PMI for France at 44.4 was marginally better than the predicted 44.2 but Germany’s reading of 47.9 undershot the predicted 49.0, while the eurozone outturn of 46.5 was below the hoped-for 46.8.
US flash manufacturing PMI for April came in at 52.0, missing the 53.8 forecast and down from March’s revised 54.6.
In wider markets, the euro was about two-thirds of a cent softer at 1.2997 against the dollar, while Germany’s DAX and France’s CAC-40 were up 1.31 percent and 2.34 percent respectively.
As for the more industrial commodities, light sweet crude (WTI) oil futures for June delivery on the Nymex were down $1.07 at $88.12 per barrel and the most actively traded Comex copper contract was at $3.098 per pound, down another 3.3 cents.
As for the other precious metals, Comex silver for May delivery was last down 46.4 cents at $22.950 per ounce. Trade has ranged from $22.555 to $23.91.
Platinum futures for July delivery on the Nymex were down $14.40 at $1,422.60 per ounce and the June palladium contract at $671.00 was down $10.90.
Platinum and palladium ETF holdings have also fallen over the past month – metal backing the platinum funds followed by FastMarkets fell 27,231 ounces on Monday to 1,608,330 ounces and while holdings in the palladium funds actually rose 4,865 ounces to 2,336,011 ounces but are down from the record high of more than 2.38 million ounces.
