Gold on safe-haven bid while global markets sputter

Otmane El Rhazi from The Bullion Desk.

Gold prices hear near Friday’s settlement while a rout across markets extended into the new week, fuelled by uncertainty in China.

Gold for December delivery on the Comex division on the New York Mercantile Exchange was last down 30 cents or less than 0.1 percent at $1,159.30 per ounce. Trade has ranged from $1,151.80 to $1,165.00.

Overnight, the Shanghai Composite Index dropped 8.5 percent to 3,209.91; the dollar responded by declining 1.5 percent to 1.1555 against the euro.

The index erased the entirety of this year’s gains while fear mounts over the extent of the Chinese economic slowdown. The world’s largest consumer of commodities is of transitioning the economy from investment-based to a service-oriented model.

“Gold is holding its own well despite the heavy losses suffered by commodities across the board,” Commerzbank said. “Nonetheless, gold has not been able to gain any further in spite of the sharp rise in risk aversion and a noticeably weaker US dollar.”

Meanwhile, the net long fund position (NLFP) on Comex climbed 9,217 contracts last week when 11,283 lots of short-covering outweighed 2,066 contracts of long liquidation.

The gross short position is at 144,053 contracts, down from a record high of 159,441 contracts on July 21. Previous peaks were around the 110,000-120,000 level, so the gross short position remains large.

Concerns that the Federal Reserve will raise interest rates in September have been drowned out by growing bearish sentiment in recent days.

At present, the CME Group Fedwatch has a probability of a rate rise in September of 24 percent, down from nearly 50 percent in mid-August. The Fedwatch is a tool to gauge market expectations of a potential change to the Fed Funds target rate.

Turning to wider markets, Germany’s DAX and France’s CAC-40 were down 3.9 percent and 4.7 percent respectively.

As for the other precious metals, Comex silver for September delivery was last down 63.1 cents at $14.680 per ounce. Trade has ranged from $14.585 to $15.390.

Platinum for October delivery on the Nymex declined $44.10 to $983.10 per ounce while the most actively traded palladium contract was at $568.50.40, down $35.95.

(Editing by Mark Shaw)

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