Investors wary on gold but hope springs eternal

While sentiment for gold seems much more positive  than it was at the end of 2011, many investors remain wary of the yellow metal.

According to Comex data for the week ending January 6th, while net speculative longs rose by 6.2 tonnes, the 6.6tonne jump in speculative short positions more than negated the move.

And, as Standard Bank’s Marc Ground points out, ” Although only a modest decrease this past week, the sustained deterioration (this marks the fourth week of decline) in the net position is a signal that the speculative market remains wary of gold’s prospects.”

Adding to this feeling is the continued selling seen in the ETF space, which saw 11.3 tonnes shed over the week. According to Ground, ” This underscores the tentative attitude of investors. However, with ETF holdings at 2,424.7 tonnes – having gained 177.2 tonnes over the past year – gold has enjoyed ample investor support over 2011, something we feel will continue into 2012.”

UBS too, remains positive that investors are likely to support the yellow metal in 2012, despite the tepid response so far this year.

“Sentiment for gold is much better than it was at year-end. In fact it’s probably much better than it has been for a month or two. Nonetheless caution still prevails, as was clear from Friday’s price action,” the bank wrote in its Precious Metals daily note.

Adding, “The positive NFP number offered gold the opportunity to challenge the 200-day moving average at $1633.54 but it was not to be. Selling ahead of this area, along with stops getting triggered, caused gold to quickly cede nearly $20. Disappointment at gold’s failure at the 200-day moving average prompted some recent longs to bail in frustration. But there are still enough believers out there who think it’s only a matter of time before this technical area is breached; renewed buying on Friday saw gold close at $1617.”

According to Ground, another good sign for the market is that net speculative length is currently around 21.2% of total open interest. “This is well below last year’s average of 27.0% and close to the 2011 low of 19.2%, indicating a market that is far from overstretched,” he says.

While gold net longs are currently at their lowest level since April 2009, it seems as though, there are still many that belive the bull market has some way yet to run. – Mineweb.com

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Posted by admin on Jan 9 2012. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry