The gold market holds the line above $1,800. However, according to the latest data from the Commodity Futures Trading Commission, it is still failing to gain any upward momentum as hedge funds have withdrawn their bull bets.
TD Securities: Funds aggressively mitigate long gold exposures
While gold prices have failed to rise above the critical resistance of around $1,830, as we reported by Somagnnews, many are pointing to the precious metal’s resilience as real interest rates hit their highest level in nearly two years. The gold market remained stable as the gold market began pricing with more aggressive moves from the Federal Reserve trying to contain the threat of rising inflation. This year, markets see the potential for four rate hikes, with rate hikes set to begin in March. Commodity analysts at TD Securities comment:
Hawkish signals from the Fed, market expectations that a Fed rate hike is imminent in March, and growing speculation that QT (Quantitative tightening) is on the cards over the next 12 months has led funds to aggressively reduce their long gold exposure. Investors expanded shorts and sold longs as interest rates convincingly rose along the curve.
However, TDS notes that despite the US central bank’s attempts to tighten interest rates, there is a chance for gold to catch a short offer as real interest rates are expected to remain low.
“Market participants will avoid buying bullion before the Fed’s first rate hike”
The CFTC’s Commitments of Traders report for the week ended Jan. 11 showed that money managers slashed their speculative gross long positions in Comex gold futures by 4,955 contracts to 119,297. At the same time, short positions increased by 243 contracts to 44,987. Gold’s net position is now at 74,310 contracts, down more than 6% from the previous week.
During the survey week, gold prices managed to bounce off the support above $1,780 and climb above $1,800. While there are expectations that gold prices may eventually rise, some analysts say the current consolidation period could continue until the next monetary policy meeting. Commerzbank precious metals analyst Daniel Briesemann comments:
In our view, market participants will avoid buying gold before the first rate hike by the US Federal Reserve. They may be hoping that the Fed’s meeting next week (January 25/26) will give them more and/or clearer signals that the Fed will begin its rate hike cycle in March.