Gold futures posted small gains on Monday as speculative investors gingerly waded back into the water; however, lacklustre physical demand could cap the gains.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last up $3.10 at $1,115.80 per ounce. Trade has ranged from $1,112.90 to $1,119.30.
In last week’s big news, the People’s Bank of China (PBoC) surprised the market by devaluing the yuan for three straight days.
“The PBoC’s move can potentially delay a Federal Reserve rate hike in September, and thus is viewed as supportive for gold prices. Physical demand, however, remains weak,” Barclays Capital, noted.
The World Gold Council last week reported that second quarter gold demand totalled just 914.9 tonnes, which is the lowest level in six years. However, total physical supply also dropped five percent year-on-year, led by the drop in recycled supply.
“Although mine supply rose three percent, recycled supply dropped eight percent,” Barclays said. “We estimated marginal cash cost for mine supply is around $1000 per ounce right now; however recycled supply can be much more price-sensitive. It is an early sign of supply response with recycled gold now at an eight years’ low.”
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.
Here in the, empire state manufacturing index missed the mark at -14.9, well below the 5.0 forecast. Later today will see the National Association of Home Builders (NAHB) index.
In the wider-markets, the dollar was 0.06 percent stronger at 1.1102 against the dollar, while Germany’s DAX was down 0.15 percent, while France’s CAC-40 rose 0.18 percent.
As for the other precious metals, Comex silver for September delivery was down 1.3 cents at $15.200 per ounce. Trade has ranged from $15.180 to $15.290.
Platinum for October delivery on the Nymex was down $1.00 at $993.00 per ounce, while the most-actively traded palladium contract was at $613.10 per ounce, down $4.40.
(Additional reporting by Ewa Manthey)
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