Gold price retreats from 113-day high on firmer equities, profit taking
iNVEZZ.com, Monday, July 14: The price of bullion has dropped today as Asian equities strengthened, but it remains close to a four-month high reached last-week on safe-haven demand due to geopolitical tensions in the Middle East and Ukraine. Gold futures for August settlement tumbled 1.31 percent to $1321.50 a troy ounce on the New York Mercantile Exchange (NYMEX) as of 08:32 BST. The precious metal climbed to $1,346.8 on Thursday – its highest since March 19 on signs of financial stress in Portugal.
“The Portugal fears have subsided as markets don’t think it is going to be another widespread crisis,” a trader in Tokyo told Reuters. “However, the safe-haven demand for gold is still there due to the tensions in the Middle East. Portugal was only one reason for safe-haven bids, the geopolitical situation has not changed,” the trader said.
As of yesterday, Israeli air-strikes on the Gaza strip had resulted in the death of at least 133 civilians, 36 of whom were children, according to the United Nations Office for the Coordination of Humanitarian Affair. One foreign tourist died of a heart attack in Jerusalem during an air raid alarm, according to Bloomberg.
Brenda Kelly, chief strategist at IG, argues that after six weeks of advances and an eight percent appreciation from June lows, some market participants are locking in profits before the start of the US corporate earnings season, the Wall Street Journal reported.
“We were concerned that we were not seeing any follow-through buying to accompany the $40/ounce spurt higher we saw set in on June 19th,” Edward Meir of INTL FCStone told the Journal. “We therefore expect to see a little more upside action this week, with festering geopolitical hotspots providing support.”
Russia threatened Ukraine with “irreversible consequences” after a shell fired across the border took the life of a man on Russian territory.
Investors are eyeing Federal Reserve Chair Janet Yellen’s testimony before law makers for clues about the timing of US interest rate hikes. She is to testify before the Senate Banking Committee in Washington on July 15, and the House Committee on Financial Services the following day.
The recent appreciation in the price of gold has dampened physical demand in Asia. There hasn’t been “much demand from India, China or anywhere in Southeast Asia for the last few weeks,” a dealer in Singapore told the London-based news agency. “Unless prices drop sharply in a short period of time, I don’t think we can expect any price support from the physical markets.”
“Recently we have seen higher prices across the precious metals complex, most of which, look toppy,” Barclays Plc analysts led by Christopher Louney wrote in a note today, as reported by Bloomberg. “Gold will closely watch for any news around the timing of a rate hike, which if earlier than expected, will likely introduce downside risks to the precious metal,” they argued.
The net-long position in gold, i.e. the difference between money managers’ long and short positions, climbed to 144,272 futures and options contracts in the week ended July 8, according to the US Commodity Futures Trading Commission. It represents the highest level since November 2012.
Jeffrey Currie, global commodities research head at Goldman Sachs Group Inc., told Bloomberg on July 11 that he sees bullion at $1,050 by the end of 2014, maintaining his forecast from the start of the year. Societe Generale’s Michael Haigh predicts the price will tumble to $1,245 in the fourth quarter.
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