Today’s AM fix was USD 1,245.75, EUR 906.13 and GBP 757.76 per ounce. Yesterday’s AM fix was USD 1,228.50, EUR 895.60 and GBP 749.95 per ounce.
Gold rose $11.90 or 0.97% yesterday, closing at $1,240.60/oz. Silver soared $0.39 or 2% closing at $19.87/oz. Platinum climbed $19.49, or 1.4%, to $1,372.74/oz and palladium edged up $2 or 0.3%, to $733.50/oz.
Gold edged up to a near one week high today as the dollar weakened and technical support held again prompting funds and investors to allocate funds to gold. Given the poor fiscal and monetary state of the U.S., we expect the dollar to weaken in 2014 which should contribute to higher gold prices.
Trading was subdued on the COMEX yesterday as hedge funds and banks turned their attention to the Fed’s policy meeting next week. Volumes in the futures market and the physical market are thin due to little price movement, a lack of news and the wind down in the run up to Christmas.
There is a risk of a sizeable short covering squeeze after last Friday's U.S. Commodity Futures Trading Commission (CFTC) data showed hedge funds had cut their bullish bets on gold to the lowest since July 2007. This means that the speculative hot money is the least bullish on gold since 2007.
This suggests that recent heavy selling in gold might have run its course and that speculators and weak hand investors have liquidated their positions which are now being held by stronger hands.
The CFTC data showed that hedge funds also raised their bearish bets in gold to near a 7 and a 1/2 year high. This heightens the risk of a short covering rally. The majority of hedge funds are momentum and trend driven and therefore they tend to often get market bottoms and tops wrong.
They frequently go long at market tops and go short at market bottoms and are therefore considered a good contrarian signal.