Gold prices and ETFs have fallen to a six-month low, breaking through technical support at $1,600 an ounce, prompting record Chinese activity.
The resurgence of risk appetite over the past month has seen a general clearing out of net long COMEX gold speculative positions to August 2012 levels, as investors seem positioned for ‘the worst is over’ scenarios.
As investors look to have been rotating into more cyclical precious metals, like silver, a fall in the gold price has attracted buyers, prompting a gradual rebound in gold positions. Bargain hunters have also begun to emerge, giving some stability to the gold price above US$1600oz., and boosting volumes on the Shanghai Futures Exchange to record levels.
While the technical picture has fueled the liquidation of gold holdings, macro fundamentals suggest a potentially attractive entry level, as global financial markets remain awash with liquidity, global interest rates expected to remain extremely low for the foreseeable future and key macro risks lingering, particularly for the Eurozone economy.