MW: Gold rebounds; bullish bets fall to 4-year low
Silver, palladium, platinum see big jumps after last week’s selloff
By Polya Lesova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) — Gold futures rebounded on Monday from last week’s selloff, buoyed by weakness in the U.S. dollar and concerns about the outcome of Italy’s election.
Gold for delivery in April GCJ3 +1.16% rose $18 to $1,590.80 an ounce in electronic trading on Globex.
Gold fell $5.80, or 0.4%, on Friday to settle at $1,572.80 an ounce on the Comex division of the New York Mercantile Exchange. Gold closed out last week with a 2.3% loss and at the lowest settlement level for a most active contract since July 18. Read: Gold ends at seven-month low, down 2.3% on week
In the week to Feb. 19, net long positions were slashed by 36%, putting them at their lowest level since November 2008, according to analysts at Commerzbank AG. “Since the major price slide from mid-last week is not yet covered by the current statistics, net long positions are likely to have been further reduced in the meantime,” they noted.
Gold rebounded on Monday, boosted by dollar weakness and concern over Italy. “The precious metal is profiting from the uncertainty amongst market players with respect to the outcome of the elections in Italy, which are regarded as an indicator of whether the debt crisis in the euro zone could flare up again,” the Commerzbank analysts said.
Gold is seen as a safe-haven asset that tends to benefit at times of political and economic uncertainty. Italians on Monday are voting for a second day in a general election, with investors watching the results closely to see if a stable and effective government can be formed. Read: Can Berlusconi dent the global stock rally?
In the currency markets, the dollar index DXY -0.43% dropped 0.4% to 81.116. Dollar weakness makes dollar-denominated commodities such as gold more attractive for holders of other currencies.
In economic news, the initial reading of HSBC’s Chinese manufacturing survey showed a slower pace of expansion in February, due to a decrease in new export orders and a backlog of existing work. Read: China manufacturing growth eases, HSBC says
Gold was battered last week, in part after the minutes from January’s Federal Open Market Committee meeting hinted that the Federal Reserve may scale back its massive asset-buying program earlier than expected.
“Gold’s correlation with risky assets has fallen, but that with U.S. Treasurys has risen. Combined with the market’s hawkish read on the FOMC minutes, gold has tumbled to seven-month lows,” said Suki Cooper, commodities strategist at Barclays Capital.
Cooper noted that gold weakened even after an improvement in demand in India and buying in China.
“Prices have struggled to find a cushion from the physical market as it fails to offset the weakness on the investment side,” she said.
Net redemptions accelerated in February, Cooper noted, with the largest gold exchange-traded product, the SPDR Gold Trust GLD +0.60% , seeing net redemptions of 21 metric tons in a single session for its weakest daily session since August 2011.
In other metals trading, silver for March delivery SIH3 +2.00% rose 65 cents to $29.11 an ounce, after tumbling 4.7% last week.
March copper futures HGH3 +0.40% added 2 cents to $3.55 a pound. Copper lost 5.5% last week.
April platinum PLJ3 +0.26% surged $22.90, or 1.4%, to $1,630.30 an ounce while March palladium PAH3 +1.72% gained $14.70, or 2%, to $750.80 an ounce. The metals lost 4.2% and 2.4%, respectively last week.
Polya Lesova is MarketWatch's New York deputy bureau chief. Follow her on Twitter @PolyaLesova.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer. Sarah Turner in Sydney contributed to this report.
