Gold will remain largely dictated by movements in the euro/dollar exchange rate

After yesterday’s rapid gain, owed in large part to a weaker dollar and improving sentiment, gold has remained largely range bound. PGM ran into selling pressure during the New York trading session, surrendering the gains of the earlier part of the day. However, since then, interest in platinum and palladium has been muted.

For the rest of the day, price action in gold will remain largely dictated by movements in the euro/dollar exchange rate. Although it appears trading activity is lacking at present, making prices relatively stable.

Gold support is at $1,691 and $1,669. Resistance is $1,718 and $1,721.

Gold have enjoyed a resurgence in interest

Gold have enjoyed a resurgence in interest, after market sentiment was bolstered by reports over the weekend that the IMF was preparing a loan facility for Italy. Apparently, the IMF would make €500bn to €600bn available at an interest rate of between 4% and 5%. The IMF has already denied these reports. Nevertheless, the euro has strengthened on the news,
which has relieved much of the pressure that had been weighing down on gold last week.

Optimism over the Eurozone was further enhanced by speculation that headway had been made regarding the European Financial Stability Fund (EFSF). Apparently, EU finance ministers have reached an agreement on how to leverage the rescue fund, according to documents leaked to Reuters over the weekend. News out of the US is also contributing to the more upbeat mood on markets, with preliminary reports from retailers suggesting that it was a good Black Friday weekend. With a slew of US data flow out this week, this optimism over the outlook for US
economy is sure to be tested in the coming days.

ETF buying of gold continued this past week, 11.4 tonnes added. Momentum may appear be slowing (28.2 tonnes were added the previous week) but ETF holdings now stand at 2,430.1 tonnes, a new high for the year. The continued ETF support is encouraging, and underscores the growing confidence in the gold market. After three weeks of gains, ETF holdings in silver fell
this past week, losing a substantial 185.1 tonnes. Once again, it appears that ETFs remain cautious on silver, if not outright bearish.

Gold support is at $1,691 and $1,669. Resistance is $1,718 and $1,721.

Gold prices remained relatively range-bound yesterday

Gold prices remained relatively range-bound yesterday, largely as a result of the absence of US participants celebrating the Thanksgiving holiday. In Asia, there was some support for silver in the form of short-covering, while some two-way interest in gold was evident but overall activity remained lacklustre.

Weakness has begun to creep into markets as the mood once again has swung towards “risk-off”. Asian equities ended the day down, and European stocks are currently under pressure. Gold are suffering under a resurgent dollar, with electronic trading exacerbating the losses, especially for gold. Despite the price fall in gold this morning, we still haven’t seen any significant physical demand coming through. However, as we’ve seen in the past, this buying usually emerges below the $1,650 level, which should then limit further downside. Markets are vulnerable to erratic moves as trade activity remains quite thin (with US participants at best only coming in for half
the day, and many away for a long weekend), and Eurozone uncertainty keeps investors jittery.

Nevertheless, we would view any downside in gold as a buying opportunity, given our long-term view that the metal will push higher in 2012. From a cost-of-production perspective, platinum is good value at current levels below $1,550. Gold support is at $1,677 and $1,675. Resistance is $1,692 and $1,704.

Gold, continued to enjoy support yesterday from a weak dollar and some physical buyers

Gold, continued to enjoy support yesterday from a weak dollar and some physical buyers taking advantage of the relatively low prices. In addition, the IMF’s proposed changes to its existing emergency programme sparked some optimism in alleviating the Eurozone debt crisis, and consequently gave markets a momentary respite.

However, it soon became apparent that this would not go nearly far enough in addressing the current scope of problems in Italy and Spain. Nevertheless, Asian buying of gold continued to provide support overnight, much as it had done the previous day, although, with Tokyo markets closed, it was left to Chinese buyers to keep prices on the up. This morning, support soon evaporated as markets were rattled by weak Eurozone economic data and a poor bond auction in Germany. PMI figures revealed a continued and worse-than-expected contraction in German (47.9 vs consensus: 48.5) and European industrial activity (46.4 vs. consensus: 46.5). This morning’s auction in Germany failed to obtain bids for 35% of the bunds on offer. This is keeping the euro on the back foot — this strong dollar environment continues to make it extremely difficult for commodities to make any solid gains.

In addition, we expect some liquidation ahead of the Thanksgiving long weekend in the US, so the potential for any upside today is limited. Given our long-term bullish stance on gold though, we’d advocate buying on dips to augment a strategic long position.

Gold support is at $1,675 and $1,655. Resistance is $1,712 and $1,727

Gold is looking better after receiving some solid support in Asia

US trading pushed gold down to a four-week low (amid a cross-asset liquidation that has become all too familiar of late) on heightened concerns over the ability of the US congressional leaders to reach agreement on reducing the budget. As it turned out, and unsurprisingly, no agreement was reached and this has thrown into doubt the extension of existing fiscal stimulus programmes that many believe have been propping up the US economy.

This also reignited fears over the US sovereign credit rating facing a downgrade, but overnight investors took heart over announcements by Standard & Poor (S&P) and Moody’s that they would be keeping their respective ratings unchanged. Fitch said that it would be reviewing its rating and provide a conclusion by the end of November — most participants are expecting a change to negative outlook.

Today, gold is looking better after receiving some solid support in Asia, especially on the Shanghai exchange. A relatively weaker dollar is also helping gold regain some lost ground. The other precious metals are largely tracking gold, although interest in PGM is relatively lacklustre.
Physical demand for gold is starting to return at these levels, with our Standard Bank Gold Physical Flow Index once again pushing out of a brief stay in negative territory (indicating net selling). We’ve seen this physical demand return time and again at around $1,650, providing a solid support level.

Gold support is at $1,665 and $1,636. Resistance is $1,726 and $1,756.

Gold, along with the rest of the commodities complex, have come under selling pressure this morning

After a relatively stable Asian trading session, Gold, along with the rest of the commodities complex, have come under selling pressure this morning. Once again, uncertainty concerning the Eurozone is rife, which is keeping the dollar relatively strong despite worries over the upcoming politicking regarding US deficit reduction plans. As expected, Spain will have a new government, although markets remain unsure of the political strength needed to adopt a severe austerity plan that will steer this country out the current debt crisis.

Net speculative length increased again this past week, although only a marginal 9.1 tonnes were added (73.7 tonnes were added the previous week). The change in the net position was largely due to speculative longs being added (13.9 tonnes), with an increase in speculative shorts of 4.8 tonnes, detracting from the net improvement. Although only a marginal increase this week, the sustained improvement in the net position (now at 655.2 tonnes), is a signal that the speculative market is showing a growing confidence in gold’s prospects.

ETF buying continued apace, with 28.2 tonnes added this past week. This brings ETF holdings to 2,418.7 tonnes, a new high for the year. The continued ETF support is encouraging, and underscores the growing confidence in the gold market. Net speculative length continued to climb, with a strong 243.7 tonnes added over the past week. However, while the improvements
of the past four weeks are encouraging, net speculative length, currently at 3,251.8 tonnes (compared to the 2010 average of 6,123.3 tonnes), still looks relatively weak. The increase in the net position was largely attributable to a 219.3 tonne increase in long positions. Speculative shorts saw an unwinding of 24.4 tonnes. Market positioning remains weak, but there
are growing signs that investors are becoming less bearish on silver.

Gold support is at $1,697 and $1,690. Resistance is $1,723 and $1,744.

Investors are once again jittery about the region’s prospects for solving the ongoing debt problems

Along with rest of the commodities, gold have been hard hit by renewed concerns over the Eurozone, as evidenced by soaring borrowing costs in Spain. Investors are once again jittery about the region’s prospects for solving the ongoing debt problems, as Spain moves closer to elections that many say will see a change in government.

Our main concern for commodities is the potential for liquidity squeeze in Eurozone money markets. To this end our barometer of Eurozone monetary tightness (the Euribor/OIS 3-month spread) has pushed significantly higher over the last few days. We caution that all commodities will suffer should money markets dry up, even gold and silver.

Despite concerns over the Eurozone, investment demand seems lacklustre as investors seem to prefer the relative safety of the dollar. This is something we have seen happen often over the past few weeks, but eventually investor demand does again return, so we could see some strength on the Monday open (barring any major developments on the Eurozone front).
Our Standard Bank Gold Physical Flow Index (GPFI) remains in negative territory, indicating the relatively weak physical demand. However, the same thing happened a few weeks ago and physical demand soon rebounded. We are confident that this will happen again as buyers in Asia (more from China, Thailand and Indonesia than India) return to the market at the current
relatively low prices. According to previous seasonal patterns, Indian buying should return around January next year.

Gold support is at $1,703 and $1,678. Resistance is $1,759 and $1,792.

Gold trended downwards yesterday

Amid some volatile moves, gold trended downwards yesterday, once again leading the rest of the precious metals complex. There was a sudden sell-off in COMEX which pushed gold down to around $1,723. The pattern of movement in gold largely mimics that of the dollar, especially in relation to the euro. With the dollar holding its relative strength, it appears as if any upward momentum in gold, and the rest of the complex, will be a lot to ask.

Yesterday’s US consumer inflation came in below expectations, down 0.1% m/m (consensus: 0.0%). While this might be read as opening the way for more monetary easing (something that would benefit precious metals, especially gold) we prefer to focus on what it might imply about the health of the US economy. The short-term economic supply curve would suggest that
when inflation falls faster than expectations, output (in the short-run) should decline too. One data point is not a trend but we would read further price declines beyond expectations as a negative signal for short-term US growth. A weaker US economy could see renewed interest in safe-haven assets, such as gold and silver, which have been at a recent disadvantage to the
dollar.

Our Standard Bank Gold Physical Flow Index (GPFI) has once again dipped into negative territory today, indicating relatively weak physical demand. However, the same thing happened a few weeks ago and physical demand soon rebounded. We are confident that the same pattern will emerge as buyers in Asia return to the market at the current relatively low prices.
Gold support is at $1,746 and $1,735. Resistance is $1,777 and $1,796.

Gold physical demand slows, but still robust

Gold is finding strong resistance on approach of $1,800. Open interest and volume in December COMEX options with strikes at $1,800 are large. As a result the gold market may remain around this pivot point until option expiry on 22 November.

Physical demand for gold has declined from the high levels seen in October. However, in recent days with gold dipping towards $1,760 demand for gold is improving, slowly but steadily. This is providing support to the gold price. Buying interest out of India has been particularly strong in
October. That strong demand has fallen away. But we have witnessed broad-based physical buying interest throughout Asia for most of Q3:11 with physical demand in places like Thailand, Indonesia and China particularly strong. As a result, the drop in demand from India is less detrimental to the gold price than would otherwise have been the case. At the same time gold scrap sales, though present, have been sporadic rather than consistent.

Our Standard Bank Gold Physical Flow Index (GPFI), which briefly pushed below zero earlier this month, has rebounded, indicating that physical demand remains in place, albeit at lower levels than in October. Turning to the futures market, we see room for new longs to be added. According to the latest CFTC data, as a percentage of open interest, net speculative length in OCMEX gold is currently around 23.8%. This is still well below last year’s average of 31.8%. To us this is a sign that the market is not crowded.
We believe gold will continue to push higher into 2012. We target $2,000 in Q1:13.

Market positioning favours gold | Singapore GOLD Investment

Market positioning favours gold | Singapore GOLD Investment

Market positioning favours gold

According to the latest CFTC data, released only yesterday due to Friday’s holiday in the US, we are seeing growing investor interest in gold. Silver is also garnering support, but the market still appears weak.

Net speculative length for COMEX gold increased again this past week, with a respectable 73.7 tonnes added. However, unlike in the previous week, the change in the net position
was largely due to speculative longs being added (72.3 tonnes), with only a marginal decrease in speculative shorts (1.4 tonnes).

Given the sustained improvement in the net position (now at 646.2 tonnes), the speculative market is showing a growing confidence in gold’s prospects. ETF buying continues to gain momentum, with 29.0 tonnes added this past week (compared to the 16.8 tonnes added in
the previous week). This brings ETF holdings to 2,390.5 tonnes, within touching distance of this year’s high of 2,406.1 tonnes. The continued ETF support is encouraging, and underscores
the renewed confidence in the gold market.

Our strategic view remains unchanged: gold will push higher in 2012 with a target of $2,000 in Q1:12. Turning to COMEX silver, net speculative length continued to climb, with 150.1 tonnes added over the past week. However, there is still a long way to go to recover from the 3,060.0 tonnes lost previously, so net speculative length currently at 3,008.1 tonnes (compared to the 2010 average of 6,123.3 tonnes) still looks relatively weak. The increase in the net position was equally attributable to a 73.1 tonnes increase in long positions and 77.0 tonnes shed from speculative shorts.

This brings speculative shorts to a total of 997.6 tonnes — now below last year’s average. Market positioning remains weak, but there are growing signs that investors are becoming less bearish on silver. The improvement in ETF holdings was less substantial this week, with only 24.7 tonnes added, compared to the previous week’s gain of 270.9 tonnes. So, while the gains of the
last two weeks are promising, it appears that, while no longer overtly bearish, ETFs remain cautious on silver.

Although market positioning is more encouraging, we also remain cautious of taking any positions in silver just yet.

Doubts and uncertainty over the Eurozone are sure to resurface which could see renewed interest in especially gold

Despite, or perhaps as a result of thin trading volumes owing to the US Federal holiday on Friday, precious metals enjoyed the rally on the US market open. Not even a much-better-than-expected US consumer confidence could stall the upward momentum.

The University of Michigan gauge of consumer confidence rose to 64.2 according to preliminary estimates for November, a marked improvement on the previous month’s 60.9 and further allaying investor concerns that the US economy might slip into recession.

This morning, we’ve seen a slight pullback in gold as markets have greeted the formation of new governments in Greece and Italy with optimism. However, the weak performance of European equities belies this optimism and hints at some market scepticism concerning the ability and political will of both governments to enact measures that would satisfactorily contain their respective debt problems. In addition, attention is starting to turn to Spain and its rising borrowing costs. To this end, tomorrow’s bills auction in Spain will be a key barometer of investor sentiment.

For today, moderate risk taking could see gold lose some ground. We don’t feel this situation will persist, as doubts and uncertainty over the Eurozone are sure to resurface which could see renewed interest in especially gold and silver. However, we continue to warn that should the Eurozone debt crisis result in a severe drying up of money markets in Europe, we could see all commodities fall rapidly, even gold.

Gold support is at $1,750 and $1,724. Resistance is $1,796 and $1,816.

Gold looks increasingly like a cash cow that’s long overdue for milking

Analysts at Scotia Mocatta presented a rather bearish comment on gold in a note to clients yesterday, contending that lower prices are likely for the gold in the near future.

“The North American market definitely squeezed out some European shorts yesterday but another failure to break $1800 really didn’t bode well for gold’s overall prospects yesterday,” the firm wrote. ”Although there has been some fresh ETF demand in general gold has been walked higher in recent days and frankly it really hasn’t been performing that well.”

Scotia Mocatta went on to say that “With governments falling left and right in Europe if there was ever a time that gold should be pushing the envelope as a safe haven then it’s now and it’s simply not happening – so why isn’t it happening? We think the reason is it remains a very overcrowded trade and if it’s hard to attract fresh buyers in the current environment.”

Couple this with the fact that people need cash in either a ‘risk on’ or ‘risk off’ environment,” the firm added, “and gold looks increasingly like a cash cow that’s long overdue for milking.”

As for specific targets on the downside, the firm asserted that “When $1750 breaks the 100 Day MA at $1692 will past be in play…although there will be pockets of support along the way.”

The firm did not provide a longer-term gold price target, however.

Gold once again succumbed to liquidations across assets

Yesterday, Gold once again succumbed to liquidations across assets, as the market grew increasingly anxious about contagion spreading throughout the Eurozone. Italian 10-year bond yields reached a record high yesterday, only pulling back marginally after an intervention by the ECB. Investors are concerned that a protracted process of political succession in
Italy (and also as in Greece) will worsen the effect of the current debt problems facing the Eurozone. The reaction of markets was most likely exacerbated by LCH Clearnet’s decision to raise margins on Italian debt.

Looking at Eurozone money markets, we’ve seen our barometer of tight liquidity (the Euribor/Overnight Swap) push higher. As we’ve mentioned before, tighter monetary conditions spell trouble for commodities, even gold. This drying-up of liquidity is also associated with gold’s increased co-movement with equities, and heightened volatility.

Some support for gold is evident from resurgent physical demand as seen in Asia. Obviously physical buyers, which have been largely absent the past few days (due to holidays in the Middle East), have returned to take advantage of the current price dip. We see strong buying emerging around the $1,750 level, which could limit gold’s downside, should markets continue
to sell-off.

Gold support is at $1,752 and $1,740. Resistance is $1,789 and $1,813.

Italian Prime Minister Silvio Berlusconi will resign from office

Gold price briefly surpassed $1,800 per ounce Tuesday night (Asia Time) before turning sharply lower amid reports that Italian Prime Minister Silvio Berlusconi will resign from office.

The Gold price hit $1,804.40 at approximately 12:58pm ET, but subsequently tumbled to as low as $1,778.20 before rebounding slightly to $1,785.00 per ounce.

Commenting on the outlook for gold, long-time commodities investor Dennis Gartman wrote in his daily Gartman Letter that ”Regarding gold, we are, we have been and we expect to continue to be bullish of it in non-US dollar terms and most notably in EUR and Sterling terms.”

“Over the course of the past several weeks, gold has pushed steadily upward through €1200/oz, then €1250 and then to and through €1300/oz, where it effectively stands this morning as we write,” Gartman added. ”In dollar terms, there is obvious good selling at the $1800 level as there always is at ‘Big Figures’ such as this and it shall take some sort of news probably to allow gold to make its way upward through $1800 today. Nonetheless, if it does not push through today, it shall push through tomorrow and if not tomorrow then later this week, for the trend is clear and the bears are on the defensive.”

Gartman went on to note that “Interestingly, there is likely to be a greater likelihood of gold pushing upward through €1200 definitively today than there is for gold to press upward through $1800 simply because the EUR is itself so much on the defensive. Oh, and one final note, The GLD ETF reported yesterday that it had added 10.59 tonnes to its stated holdings of 1,255.65 tonnes. This we see as considerable.”

Gold enjoyed good support yesterday as fears over the Eurozone debt situation kept investors in risk-off mode

Gold enjoyed good support yesterday as fears over the Eurozone debt situation kept investors in risk-off mode. Overnight though, trading was rather lacklustre with prices remaining relatively range bound.

This morning, activity has remained light with only a small amount of gold physical buying evident on dips below $1,785. Contributing to the general lack of direction is the relative absence of physical buying from the Middle East owing to holidays in observance of Eid. Our Standard Bank Gold Physical Flow Index is still in positive territory (indicating net buying) but continues to move lower. We expect physical demand to return in full force, in line with the usual seasonal pattern in early January next year.

Today, focus will be on Italian politics as parliament prepares for a budget vote. There is some concern that the Italian Prime Minister Berlusconi will be able to secure the required majority. Such a failure could result in Berlusconi facing a confidence vote, which could delay the necessary fiscal reforms and create even more uncertainty in terms of the Eurozone debt crisis.

Gold support is at $1,765 and $1,737. Resistance is $1,811 and $1,828

Gold has enjoyed some support from continued troubles in the Eurozone

Gold has enjoyed some support from continued troubles in the Eurozone. Although it appears as if Greece is making some progress on the political front, details remain sketchy and markets are shifting their attention to Italy. The Italian Prime Minister has been urged to step down as Italy’s borrowing costs soared to new Euro-era records as investors feared spill-over effects
from the Eurozone’s ongoing debt crisis. While gold might be enjoying some safe-haven buying, we warn that should the Eurozone debt crisis result in a drying-up of the region’s money markets, all commodities will suffer, including gold.

Physical buying in gold remains light with the Middle East on holiday in observance of Eid.
Net speculative length for COMEX gold increased moderately again this past week, with 31.2 tonnes added. However, unlike in the previous week, the change in the net position was largely due to speculative shorts being unwound (20.2 tonnes), with a more modest increase in speculative longs (11.1 tonnes) adding to the overall improvement. With two weeks of improvement in the net position, coupled with a drawing down of short positions, the speculative market finally seems more confident about gold’s prospects.

ETF buying continues to gain momentum, with 16.8 tonnes added this past week (compared to the 12.2 tonnes and 4.7 tonnes added in the previous two weeks). These increases are encouraging, and underscores the growing confidence in the gold market. COMEX silver net speculative length continued to climb, with 239.2 tonnes added over the past week. However, there is still a long way to go to recover from the 3,060.0 tonnes lost previously, so net speculative length still looks relatively weak. Encouragingly, for the most part, the increase in the net position was attributable to 177.3 tonnes shed from speculative short positions.
This brings speculative shorts to a total of 1,074.6 tonnes — now more comfortably in line with last year’s average. The 61.9 tonnes added to speculative longs also contributed to the overall improvement. Market positioning remains weak, yet there are signs that investors have become less bearish on silver.

Gold support is at $1,756 and $1,744. Resistance is $1,774 and $1,779.

Eurozone’s is still a long one and fraught with difficulties and obstacles

Gold made some solid gains early of last week over uncertainty about the Eurozone after Chancellor Merkel outlined the proposed Greek referendum on this country’s continued membership of the Eurozone. However, price activity has since stalled, even after Greece’s Prime Minster Papendreou cancelled the referendum. Attention is now on today’s vote of confidence in the Greek Parliament, which Papendreou contends will be enough of a mandate to push ahead with the proposed austerity plans.

With the major opposition party declaring their support for the confidence motion, it seems a successful vote of confidence will be passed. Nevertheless, the path to a satisfactory resolution of the Eurozone’s is still a long one and fraught with difficulties and obstacles. The longer the Eurozone’s woes continue and the greater the uncertainty (as provoked by, for example, this referendum), the greater the volatility and possible short-term downside for all commodities, including gold. The main impetus for this would be a drying up of liquidity in Eurozone money markets if this region’s banks come under severe pressure because of the Eurozone sovereign debt market.

Today’s US nonfarm payrolls might be able to shift focus away from the Eurozone for a while. The market expects an increase of 95k during October, slightly lower than September's surprise increase of 103k. Our G10 analyst foresees the data being only slightly firmer than expectations and therefore prompting not much of a market reaction. Similarly, the conclusion of the
G20 summit today is unlikely to spark any major market moves.

Gold support is at $1,731 and $1,704. Resistance is $1,777 and $1,795. Silver

Gold price rallied $19.27 to $1,760.2 per ounce

The gold price rallied ahead of yesterday’s Federal Open Market Committee (FOMC) meeting and maintained the majority of its gains following the FOMC announcement. There, the U.S. central bank reaffirmed its plans to leave the Fed funds rate near zero through mid-2013 and to proceed with Operation Twist. The Fed noted that “recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated,” to help support its accommodative policies.

While the majority of the FOMC statement was quite similar to the prior one in September, one key difference was a dissenting vote from Chicago Fed President Charles Evans. Evans supported further monetary policy easing – which marked the Fed’s first “dovish dissent” in five years, according to BTIG chief global strategist Dan Greenhaus.

In addition to Evans’ dissent, another key difference was the absence of dissenting votes from Presidents Plosser, Fisher, and Kocherlakota. At the previous two FOMC meetings, these three central bankers each voted against Fed committing to its interest rate policy through mid-2013 and to implementing Operation Twist.

The gold price rallied $19.27 to $1,760.2 per ounce Friday morning after the European Central Bank (ECB) unexpectedly cut its benchmark interest rate by 25 basis points to 1.25%. The price of gold traded modestly lower near $1,725 in overnight trading, but turned sharply higher as ECB President Mario Draghi – who took over for Jean-Claude Trichet earlier this week – wasted little time in providing a clear signal on the severity of the European sovereign debt crisis.

Not to launch a third round of quantitative easing (QE3)

Gold price showed a modest reaction to the Fed statement, as they maintained the large majority of their gains near $1,738 per ounce. The Federal Reserve decided not to launch a third round of quantitative easing (QE3) or expand its set of accommodative monetary policies at its Federal Open Market Committee (FOMC) meeting on Wednesday.

Today’s FOMC announcement was released at 12:30pm ET – rather than its usual 2:15pm ET – because Chairman Ben Bernanke will be holding his second-ever post-FOMC press conference later this afternoon.

The large majority of the FOMC statement was identical to the previous statement in September – with the Fed choosing to continue with Operation Twist.

One noteable difference at today’s meeting was the existence of only one dissenting vote – that from Charles Evans, who “supported additional policy accommodation at this time.”

At the prior two meetings, three Fed presidents – Fisher, Plosser, and Kocherlakota – voted against committing to a near-zero Fed funds rate through mid-2013 and against Operation Twist.

Bernanke held his first and only press conference in April of this year – which turned out to largely be a non-event. As GoldAlert wrote at the time, “It was quite disappointing to hear the softball questions lobbed at Bernanke by many members of the mainstream media. The American people would have been much better served if the journalists in attendance had asked the type of challenging, more serious questions that get to the heart of the unfortunate consequences of the Fed’s policies.”

Physical gold buying has slowed down post-Diwali

Despite markets adopting a risk-off stance, as evidenced by losses across global equity markets, gold have failed to garner much interest from a safe-haven perspective. The announcement by Greece’s Prime Minister that he will put the government’s planned austerity measures to a referendum has renewed concerns over the Eurozone debt situation, which has not only fuelled risk aversion but also contributed to a stronger dollar. It is this dollar strength that is curbing safe-haven demand for gold.

In addition, physical gold buying has slowed down post-Diwali. Our Gold Physical Flow Index dipped below zero yesterday, the first time since early August, a signal that physical selling has begun to outpace buying. Consequently, we can’t expect the support from physical buying we have seen over the past month.

Nevertheless we expect interest to pick up again in mid-December, and continue to see value in gold, especially on approach of $1,600. Gold support is at $1,694 and $1,679. Resistance is $1,736 and $1,761.

Remain constructive on gold over the long term

Gold — COMEX

1. • Open interest continues to see-saw, rising by 21.5 tonnes after the previous week’s 13.9 tonne fall. Gold open interest on COMEX now stands at 1,422.1 tonnes, still only marginally up from this year’s low of 1,400.6 tonnes. Prices also gained last week, at 6.2% w/w. This is the strongest w/w rise this year.
2. • Along with prices, net speculative length increased, although only moderately, with only 26.9 tonnes added over the past week. The change in the net position was due to speculative longs being added (33.4 tonnes), with the marginal increase in speculative shorts (6.5 tonnes) detracting from the overall improvement.
3. • Given that this week’s improvement merely erases the deterioration of the previous week, the speculative market still appears to be cautious about gold’s short-term prospects.
4. • ETF holdings continued to climb, although still only modestly, at 11.3 tonnes. While this increase is encouraging, market participants still appear uncertain about gold’s direction over the next few weeks.
5. • As a percentage of open interest, net speculative length is currently around 20.8%. This is a well below last year’s average of 31.8% — a signal of a market far from overstretched.
6. • We remain constructive on gold over the long term.