Gold Prices Touch 4-Month High, Silver Volatile, "Bucks Seasonal Pattern" as Big Investors "Reverse" Positions

[The Machine]

 

 

GOLD PRICES fell but held near new 4-month highs in London trade Monday lunchtime, holding above $1330 per ounce as European stock markets reversed earlier losses.

 

Asian equities closed the day lower after new data showed inflation in China's house prices slowing from 9.9% to 9.6% per year in January.

 

Gold trading volumes in Shanghai eased back from last week's 3-month highs as prices initially fell overnight.

 

Silver followed and extended the moves in gold prices, first dropping 1.5% before jumping to new 4-month highs above $22 per ounce.

 

"Gold is bucking its typical seasonality pattern month," says Swiss investment and bullion bank UBS, noting that February typically sees gold prices fall.

 

Pointing to weak economic data and "political uncertainty" in Ukraine after President Yanukovych fled the violent protests in Kiev at the weekend, "Gold looks likely to break out above $1340 in the coming days," reckons Jonathan Butler at Japanese conglomerate Mitsubishi.

 

Gold bullion holdings needed to back shares in exchange-traded trust funds "have increased by almost 2 tonnes since the beginning of February," adds a note from investment bank and London bullion bank J.P.Morgan.

 

"Though relatively small" against last year's outflows of 880 tonnes, "this reversal is a new and positive addition to demand," says the bank's precious metals team.

 

Total gold ETF holdings now stand around 1,828 tonnes.

 

"An increase in speculative net length [in gold futures] in the past week is currently keeping gold well supported," says Mitsubishi's Butler.

 

Latest data from US regulators show the number of bullish contracts held by speculative traders in gold futures reaching its largest level last week since early April 2013.

 

That was just before the first leg down in gold prices' big 2013 crash.

 

However, the number of bullish speculative bets now outweighs the number of bearish contracts by only the widest margin since October last year.

 

With much of this new money "short term" however, "The temptation to book profits is very strong," says UBS, "and we expect this to dominate up ahead."

 

Gold prices rise "when you are very nervous about the world," says the Wall Street Journal, quoting Wells Fargo Advisors' senior international strategist Sameer Samana.

 

But with gold prices now 20% below the start of 2013, Wells is advising that "clients use gold's rebound to sell anything they have left," says the Journal

 

[Erebus]

In Gold We Trust is the new motto, and God, of course...