Gold supported by ETF demand, short-covering

Mar 7, 2016 - 3:16 AM GMT
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The gold price inched higher during Asian trading hours on Monday on support from ETF demand and short-covering.

Spot gold was last at $1,259.90-1,260.20 per ounce, up $1.20 from Friday’s close. Trading ranged at $1,257-1,268.70 so far. 

“Strong ETF flows are providing support to the market. Gold CFTC data showed short positions continue to decline,” said ANZ Research on Monday.

Gold’s rally has been impressive despite bearish factors including weak physical demand, creeping US bond yields, stronger equities and strong US employment data that lends support for tighter monetary policy, said HSBC in a Friday report.

The adoption of negative interest rates by some central banks, weaker US dollar and persistent uncertainty in the financial markets has boosted the demand for gold ETFs and prompted short-covering and fresh buying, it said.

“We remain positive as the rally is clearly intact but at these high prices restrained physical demand may begin to temper the rally and we could be in for some profit taking or liquidation,” the bank added.

In data released Friday, US non-farm payroll employment increased by 242,000 in February, which easily beat the forecast of 195,000. The unemployment rate was unchanged at 4.9 percent, the US Bureau of Labour Statistics reported. The December and January readings, meanwhile, were revised upwards by a combined 30,000.

But average hourly earnings fell 0.1 percent. A lack of wage growth signals that even as millions of Americans have returned to the workforce since the recession, there is still slack in the labour market.

“While the overall message was of continued improvement in the labour market, it was not too hot for markets to fear imminent Fed action,” said the Bank of New Zealand on Monday.

In other commodities, the Brent crude spot price rose 1.16 percent to $39.37 per barrel, and the Texas light sweet crude spot price increased 0.66 percent to $36.53 so far on Monday.

In equities, the Shanghai Composite is so far up 0.69 percent to 2,893.842 on Monday.

In currencies, the US dollar is 0.14 percent higher at 97.37 recently on Monday.

In other precious metals, silver rose $0.01 to $15.505/15.525 recently. Platinum was unchanged at $974/979,while palladium was gained $3 to $553/558 so far on Monday.

On the Shanghai Futures Exchange, gold for June delivery was unchanged at 265.15 yuan per gram, while June silver was flat at 3,463 yuan per kilogram.

(Additional reporting by Dalton Barker)