Gold Prices Touch Recent Highs But Market Remains Weak

Gold gave back some of the week’s gains to trade at 1226.50 down by $7.80 as Asian traders sold off the shiny metal to book profits after gold climbed above the 1234 price level on Tuesday before the US dollar began its rally. Gold is expected to continue to decline today as risk off sentiment seems to be exiting the markets. Silver continued playing its ping pong game, giving up 175 points this morning to trade at 17.228 after climbing the previous day to trade near the 17.50 price level. Platinum followed suit giving up $6.95 to trade at 1259.85. Concerns over faltering global growth triggered a bruising selloff in global equity markets in the past week, and investors remain reluctant to buy into riskier assets as the drumbeat of weak data showed no signs of abating. Traders seemed to make an about turn late in the session on Tuesday.

The U.S. economy is flashing some signals that should boost its currency. Among them: improvement in the nation’s current account deficit; deleveraging in the private sector; a boom in domestic energy production; improving growth prospects at a time when the forecasts of other regions are being revised down.

Despite the strong bounce of the bottom, sentiment on the precious metals markets remains negative with both large investors and retail buyers using the 3.3% rally as an opportunity to exit the market.

The third quarter was the sixth quarter in row that holdings in global exchange traded funds backed by physical gold were reduced and September was the worst month for ETF funds since December 2013. The selling continued into October. Last week 16.2 tonnes flowed from gold-backed funds, dropping total holdings to 1,662.3 tonnes, following a 10 tonne reduction in the week to October 3.

Gold exchange-traded products saw their first inflows in a month as dovish Federal Open Market Committee minutes led to dollar weakness, while weak German data renewed interest in the hard defensive assets. Gold gained on the Comex with the yellow metal pushing four week highs as investors bought ‘safe-haven’ assets. Anxieties about a slowing global economy also sent U.S. 30-year bond yields below 3% for the first time since May 2013, while benchmark 10-year yields fell to a 16-month low of 2.18%.

Retail investors in silver continued to buy up silver-backed ETFs at the start of October pushing holdings to a record 20,182 tonnes, but silver’s good week bouncing of four-year lows convinced some to reduce exposure to the metal. Last week silver funds lost just less than 205 tonnes, the worst performance since May 2013 and dropping total holdings to 20,136 tonnes. Like ETF investors, speculators in gold and silver futures and options turned more bearish last week.

is trading flat this morning at 3.079 after seeing its stronger climb in weeks. copper climbed to fresh two-week peaks on Tuesday, boosted by technical buying after China reaffirmed plans to step up infrastructure projects to support growth, following robust September trade data.  China’s investment growth should pick up in the coming months as authorities hasten construction of water conservation projects and other infrastructure, a senior official at the country’s powerful economic planner said on Tuesday. That came after China posted a surprisingly strong trade performance in September, soothing worries over a slowdown in the world’s top metals user. September copper imports rose nearly 15 percent from the month before. This morning Copper showed a slight gain but reversed after disappointing Chinese inflation data.