Gold Unsettled as Speculators are Buying On Dips & Selling On Peaks

Shares in Asia were trading higher on Tuesday as the greenback edged down. With global traders on summer vacation and major data light there is little to give direction to the markets ahead of Janet Yellen’s speech on Friday. The Nikkei diverged from other markets and eased 0.2 percent as the yen held firm on the dollar.

A survey of Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but had little impact on stocks. Overnight in the US the Dow ended down 0.12 per cent, while the S&P 500 lost 0.06 per cent and the Nasdaq added 0.12 per cent.

With markets trading on a quiet note and little direction gold continued to ease dipping $2 to trade at 1340.51. The shiny metal is expected to remain range bound leading into the Jackson Hole symposium. Gold fell to a two-week low on Monday before recovering a bit but remains range bound.

Gold surged from a six-year low of 1,060.2 per ounce at the start of the year to 1,320.6 by June 30, amid fears over Brexit, delays in interest rate rises in the United States and rate cuts by global central banks, amid the ongoing global economic slowdown.

Silver touched a seven-week low of 18.77 an ounce and was later add 1.15 percent at 19.05.  Platinum was down 0.1 percent at 1,110.80, while palladium was 0.39 percent higher at 692.8.

The world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported an outflow of 4.5 tons last week, adding to the near 20-ton drop in its holdings the previous week, data from the fund showed. In the first half, net inflow to SPDR Gold Trust shares, the world’s biggest physically backed gold EFT, reached $12 billion, representing a record six-month inflow since the product was listed in 2004.

The annual inflow this year is also likely to break its $11 billion record in 2009, as net inflow continued in July and August, although the pace has slowed and there was a net outflow in the second week of August. Some investors have taken profits at the current levels, while others have shifted money into equity markets in Hong Kong or the United States.

Speeches presented by several members of the FOMC suggest that rate hikes might be possible this year, despite the seeming hesitance of the central bank. John Williams, President of the San Francisco Fed, said last week: “In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” William Dudley, New York Fed President, said that the measured had not been ruled out, but gave no indication that a specific move was planned. Since the comments, the chance of a move has been priced into the futures markets at around 50%, where a 0% chance was represented previously.

Gold is just waiting for the next catalyst or piece of bad economic data to hit the wires.  Some analysts now expect gold prices to reach 1,400 to 1,450 by the end of this year, as most of the uncertainties in the first half, the catalyst for the safe-haven gold, still remain unresolved. There could be some indication on US interest rates at the end of the week from Fed chairman Janet Yellen.