Gold builds solid base but not yet bullish again

May 11, 2016 - 7:37 PM GMT

Gold futures finished Wednesday in the green amid a downturn in US equities and the dollar, although the market remains hesitant challange the recent highs. 

Gold for June delivery on the Comex division of the New York Mercantile Exchange rose $13.30 or 1.1 percent to $1,278.10 per ounce. Trade has ranged from $1,266.30 to $1,280.80.

Prices have been volatile over the last few weeks with mixed data and a weakening dollar contributing to a bullish resurgence. But after initially eclipsing $1,300 per ounce, profit-taking and calmer markets sunk the entire precious metals complex.

Looking ahead, tomorrow sees a host of US data ranging from consumer sentiment and inflation data to retail sales and PPI figures, which should provide a new direction for the remainder of the week.

“Gold is really the weather vane for the metals,” Heraeus Precious Metals said in a note. “For right now, it pretty much looks like the group is building a base but has not yet regained a full bullish sentiment. Gold is not too far from where we were last week at this time, which was $1,282 level.”

On Comex, non-commercials massively boosted their bullish bets in April 26-May 3, lifting the net total by 50,791 contracts or 23 percent on the previous week to an all-time high of271,648 contracts.

Additionally, ETF demand has grown since the start of May after a quiet April, in contrast to the other precious metals. ETF investors have bought 47 tonnes of gold so far this month after just 14 tonnes in April.

“This is a good recovery and will give succour to some of the longs who were starting to worry that gold might be on the verge of a collapse,” David Govett of Marex Spectron said. “This now seems far from the case and this rally from the lows will encourage others to look to buy on dips.”

Meanwhile in a slow data day, US crude oil inventories between April 29 and May 6 came in at -3.4 million barrels, a stark divergence from previous figure of 2.8 million barrels.

Turning to US markets, the Dow Jones industrial average and S&P were down 0.8 percent and 0.6 percent respectively, while the dollar was 0.6 percent softer at $1.1429 against the euro.

As for other precious metals, Comex silver for July delivery jumped 23.3 cents or 1.4 percent to $17.325 per ounce. Trade has ranged from $17.125 to $17.620.

Platinum for July settlement gained $17.20 or 1.6 percent to $1,066.50 per ounce, while the most-actively traded palladium contract stood at $607.85, up $15.65 or 2.6 percent.

(Editing by Tom Jennemann)