Gold prices bounced back from last week’s drubbing, rising more than two per cent earlier today to put the yellow metal back over US$1,400 per ounce on the Comex futures market.
Gold for June delivery advanced $35.70, or 2.5 per cent, to $1,438.80 an ounce early this morning, and was lately trading up $28 to $1,424 an ounce.
Observers expect a continued upward trajectory for the safe haven metal, with CEO of London-based bullion brokers Sharps Pixley, Ross Norman, saying he expects gold to hit the target of US$1450 per ounce in the next few days and US$1540 per ounce in the near term.
“It needs to hit those numbers relatively quickly. If it loses momentum, [and fails to hit those markers] gold will be regarded as weak.”
Norman points out that the factors that led to gold’s prominence have not receded, citing the return of weak numbers for US growth that fall within the margin for error. “The circumstances we’ve been labouring under are a long way from being resolved. These economic issues are not behind us.”
Also at play today includes a report from the Commodity Futures Trading Commission’s Commitments of Traders, which came out after the close of trading on Friday, and showed that managed money, including hedge funds, cut down their short bets, or bets that prices will go lower, taking advantage of the sharp decline in gold prices and indicating that investors expect prices to rebound.
The report covered reportable positions among traders as of April 16. Last week's paper gold bloodbath -- Monday of last week and the preceding Friday saw precipitous falls in the price of gold, culminating in the yellow metal’s biggest one-day drop since the 1980s -- resulted in a corresponding upswing in demand for physical gold in short order, with a flood of reports late last week of lengthy queues forming outside gold showrooms from Mumbai to Auckland and merchants unable to restock supplies fast enough.
With the newly robust sales of physical gold slowing the bearish trend, breaching of the US$1400 level in European trade this morning kicked in various technical levels for buying and earlier gains were extended.
Much of the blame for the last week’s rout can be laid at the door of the unprecedented offering of 400 tonnes – or US$20 billion – of gold futures on Friday April 12 on the COMEX, an amount in line with approximately 15 per cent of global annual production. Disappointing data from China that came in just shy of the expected 8 per cent growth and rumours of sell-offs from Central European Banks played their part, fuelling the panic-selling as key technical levels were hit, triggering sell orders.
Other commodities experiencing a gain included silver, which crept as high as US$23.69 for July delivery, up 68 cents on the prior opening.