Gold as a safe-haven subsided on bolstered confidence in the strength of the economy

After better-then-expected non-farm payrolls data on Friday, interest in Gold as a safe-haven subsided on bolstered confidence in the strength of the economy. However, this optimism has failed to translate into significant risk-taking in Asian trade early this morning, which saw Gold win back some of Friday’s losses.

However, price gains failed to garner much momentum, partly as a result of thin trading volumes due to Japanese markets being closed for a public holiday. This morning, we’ve seen the complex lose some ground again, although with focus once again on the Eurozone debt crisis ahead of a meeting between German and French leaders later today, we could see some renewed safe-haven interest. In addition, tensions surrounding Iran should keep investors sufficiently nervous to warrant some demand for Gold as a store of value.

Looking at the latest CFTC data, net speculative length for COMEX gold eased off marginally, with 0.4 tonnes shed. The slight deterioration brings the net position to a 12-month low of 436.6 tonnes. Although only a modest decrease this past week, the sustained deterioration (this marks the fourth week of decline) in the net position is a signal that the speculative market remains
wary of gold’s prospects, which might explain the failure of gold to sustain upward momentum.

Net speculative for COMEX silver length saw a substantial increase into the New Year, with 407.2 tonnes added — the largest increase since August 2011. While this past week’s improvement is encouraging, market positioning still appears weak, with net speculative length at 2,179.9 tonnes (the 2011 average is 4,538.8 tonnes) and short positions totalling 2,287.2 tonnes (1,140.5 tonnes was the average last year). The lack of investor confidence in the silver market is more readily apparent in ETF holdings which show that ETFs were net sellers of silver for the fourth consecutive week — 88.5 tonnes were shed last week.

Gold support is at $1,606 and $1,596. Resistance is $1,630 and $1,642.