Comex Bets Drive Gold to Fresh Record Prices
Monday, 9/23/2024 14:34
GOLD PRICES hit new record highs against all major currencies bar the Japanese Yen on Monday, marking the 29th Dollar record of 2024 after Comex speculators raised their bullish betting to a 4-year high and futures traders raised their expectations for the US Fed to keep slashing interest rates, writes Atsuko Whitehouse at BullionVault.
Spot gold priced in the Dollar rose 0.4% in Asian trade, reaching a new record of $2631 per Troy ounce before falling back and then rallying to $2626 in London.
Bullion prices climbed 1.7% last week in Dollar terms, setting
new all-time gold highs three times after the Federal Reserve cut US interest rates by 50 basis points and lowered its year-end and 2025 forecast for borrowing costs.
So far this month gold has risen 3.7%, and it has gained 25.4% since the start of 2024.
"It seems the way higher for gold is wide open," says German refining group Heraeus in a note, "though a period of consolidation is likely as market expectations for the rate cut path for the rest of the year are refined."
Data for the week-ending last Tuesday – the day before gold broke through $2600 for the first time ever following the Fed's bold cut to interest rates from 2-decade highs – show hedge funds and other leveraged speculators in Comex gold futures and options further increasing their net bullish position as a group, marking the largest such position since March 2020.
As of September 17 says the data,
gathered and published by US regulators the CFTC, net long positions were 78% above the one-year average and 110% higher than the five-year average.
"This raises the risk of a near term pullback given positioning is so extreme," says Daniel Hynes, senior commodity strategist at Australasian bank ANZ.
As for physical bullion, "Clearly, some buying activity is hitting the tapes, but
the source remains off of our radar for now," says Daniel Ghali, senior commodity strategist at Canadian brokerage TD Securities, citing continued outflows from Chinese gold ETF investment trusts.
Since the Federal Reserve's bold interest rate cut last Wednesday, investors in the futures market have increased their expectations of a bigger cut at the November meeting to almost 50/50 according to the CME derivatives exchange's
FedWatch tool, compared to the more traditional 0.25% change.
A week ago, the futures market put those odds at only 29%.
In contrast to gold,
the price of silver – which derives nearly 60% of its demand from industrial uses – fell 1.6% to $30.70 per ounce, erasing most of last week's gains, after the People's Bank of China said Governor Pan Gongsheng will hold a press conference tomorrow to discuss financial support for the ailing economy.
The PBoC then injected cash into the banking system at a lower interest rates after unexpectedly leaving its key benchmark rate unchanged on Friday.
Gold prices on the Shanghai Gold Exchange today continued to show a discount to London quotes, reaching the widest in 3 years at $16 per ounce even as prices in Yuan terms reached a new all-time high of ¥592 per gram, the second new Shanghai record in a row.
Discounts to London in the wholesale bullion market in China, the top gold consumer nation, last week widen to average $11 per ounce. The largest discount since June 2021, that will
deter new imports and reflects weak domestic gold demand.
China saw zero gold imports from Switzerland in August, the first time since January 2021, while Chinese gold ETFs
experienced outflows in August for the first time since November 2023.
MSCI's broad index of world stocks held steady after two weeks of gains. Meanwhile, the US Dollar Index – a measure of the U.S. currency's value against its major peers – edged up 0.2% after touching a 14-month low last week. The Euro weakened against the dollar after preliminary Purchasing Manager's Index (PMI) surveys showed eurozone business activity contracted in September, reaching levels last seen in January.
Gold priced in Euros climbed to a new high of €2632 on Monday, while
the UK gold price in British Pounds per ounce also reached a fresh record high, touching £1975 per ounce.
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