The gold price moved higher on Monday morning, while the net long fund position increased for the second consecutive week.
The spot gold price remained above the psychologically important $1,100 level – it was last at $1,117.8/1,118.0 per ounce, up $3 on Friday’s close. Trade has ranged from $1,114.0 to $1,120.0 so far.
“Precious metals for now seem to be holding on well to most of their gains following the rebounds after China’s devaluation. China’s policy shift and the fall-out in emerging market currencies seem to be fuelling some investor interest into gold as the metal can act as a non-fiat currency,” William Adams, FastMarkets head of research, said.
The key will be whether prices can push up back above $1,150, which might the prompt fund short-covering, he added.
After three straight days of yuan devaluation by the People’s Bank of China (PBoC) last week and a slight increase on Friday, the Chinese central bank on Monday set its daily guidance rate at 6.3969 yuan against the dollar, up 0.01 percent from 6.3975 on Friday.
Meanwhile, the net long fund position (NLFP) in gold increased by 2,542 contracts, or nine percent, to 32,442 from 29,900 contracts in the week ending August 11, according to the latest CFTC statistics.
The increase in the net length for the second consecutive week was essentially driven by long accumulation – up 2,986 contracts- that was slightly counterbalanced by a small increase in short positions of 444 contracts. The net length is down about 72 percent in the year-to-date.
“The spec positioning has continued to improve after investors built short positions aggressively in the past two months,” Boris Mikanikrezai, FastMarkets analyst, said.
“Interestingly, the increase in the net spec length was driven by fresh buying rather than short-covering, suggesting that sentiment may have turned bullish. That said, fresh buying needs to continue in the next few weeks in order to underpin the current rally,” he added.
In data today, Japan announced its second quarter preliminary quarter-on-quarter GDP at -0.4 percent, a decline from the previous quarter’s one percent growth.
Out of the eurozone, the region’s trade balance came in better than expected at 21.9 billion.
From the US, empire state manufacturing index and NAHB housing market index are due later this afternoon.
“Going forward we expect focus to shift back to the US this week, with the CPI and Fed minutes being important and if they both point to a potential rate rise in September gold and the complex in general will be back under pressure and may test support between $1,100-1,106,” MKS said.
In the other precious metals, silver was little changed at $15.25/15.30. The NLFP increased 8,432 contracts, or 100 percent, to 16,837 from 8,405 contracts in the week ending August 11. The net length is now down 44 percent in the year-to-date.
Platinum at $993/998 was up $4 and palladium at $617/622 edged $2 higher.
(Editing by Kathleen Retourne)
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