Gold pushing higher into 2012

After two weeks of successive declines, open interest staged a marginal recovering, with 3.0 tonnes added in the past week. Gold open interest on COMEX now stands at 1,665.7 tonnes, persistently below last year’s average of 1,787 tonnes. However, prices gained a further 5.0% w/w on concerns over the fiscal situations and faltering economies in the US and Eurozone.

Net speculative length fell for the first time in four weeks, losing a significant 96.7 tonnes. The net speculative position for gold now stands at 933.5 tonnes — off last week’s high for the year of 1,028 tonnes. This decline was mostly attributable to a shedding of 94.6 tonnes in speculative longs, with a marginal increase of 2.1 tonnes in speculative shorts subtracting further from the net position.

The strong drop-off in speculative longs points to a market running out of momentum. And, although currently at 100.2 tonnes, speculative shorts are not too far from last year’s average of 90.7 tonnes, we remain wary of sentiment changing. With speculative long positions totalling 933.4 tonnes, gold looks vulnerable, which could see some price weakness in the near term. Our short-term view on gold remains neutral.

After the strong build-up of the last month, ETF holdings of gold decreased, albeit marginally, by 3.6 tonnes. This wavering investor confidence confirms our neutral tactical stance on gold. Our strategic view remains unchanged: we foresee gold pushing higher into 2012.