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Gold Price Holds 'Short Covering' Rebound, Silver Slips as China Returns from New Year

GOLD PRICES edged higher Monday in London, extending the 'short covering' rebound in Comex futures and options trading which also saw silver rally hard last week, as the US stayed closed for Presidents Day while China's financial markets reopened after the Lunar New Year holidays, writes Atsuko Whitehouse at BullionVault.
The 'industrial' precious metals of silver, platinum and palladium in contrast fell back.
After registering the 2nd weekly loss in a row, gold prices in the US Dollar today held above $2015 per ounce, recovering all but $10 of the $40 drop made following the hotter-than-expected US inflation data last Tuesday.
"Gold's rise has come on strong buying interest below $2000, which protected the downside, prompting short-covering purchases," says Bruce Ikemizu, chief director of Japan Bullion Market Association in his latest note, pointing to what had been a rise in bearish betting against gold in futures and options contracts.
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Also noting the accumulated short positions among speculative traders against precious metals, "Broad selling set up the end of week squeeze" driving the rebound in gold, silver, platinum and palladium prices, says derivatives platform Saxo Bank's commodity strategist Ole Hansen.
Chart of Managed Money category's bullish and bearish betting on Comex gold futures and options contracts, notional tonnes. Source: BullionVault via CFTC
Weekly data show that, in the 7 days ending last Tuesday, hedge funds and other leveraged speculators in Comex gold futures and options kept their bullish betting on gold prices almost unchanged as a group but increased their bearish betting sharply after that strong US consumer price data.
Together that shrank the net long position of Managed Money traders by more than 2/5ths to its lowest in almost 4 months, just before Israel invaded Gaza in retaliation for Hamas' 7th October atrocities and kidnaps.
Speculators also raised their bearish betting against silver prices, according to data published by US regulator the Commodities Futures Trading Commission (CFTC), doubling their already net short position to the heaviest since early March 2023, just before the US mini-banking crisis broke with the failure of Silicon Valley Bank.
The price of silver then rebounded last week by over 6% from new 3-week lows, regaining the whole $1-per-ounce it had lost, but slipped back 1.3% today to trade at $23.12.
Managed Money traders also grew their net short position on platinum to the largest in 3 months last week and set a fresh all-time bearish record against palladium.
"The tug-of-war between the selling of paper gold by US and European investors and the buying of physical gold by central banks and retail investors is likely to continue," Ikemizu continues, "due to the postponement of a policy rate cut" from the Federal Reserve as well as the People's Bank of China.
Although the People's Bank of China held a key policy rate steady on Sunday, again disappointing hopes for monetary stimulus in the face of the world No.2 economy's worsening real-estate slump, Chinese stock markets rose on Monday's return from the Spring Festival break, with the blue-chip CSI 300 index up 0.5% amid upbeat travel and shopping data for the Lunar New Year holidays.
As for US rates, the highest probability for the first cut from the Federal Reserve now comes in June, pushed back from a 90% certainty seen for March's Fed decision at the start of this year.
Gold prices on the Shanghai Gold Exchange – entry point for bullion into the precious metal's largest consumer market – saw little change from before the holiday, remaining at ¥480 per gram and continuing to show a strong premium over London quotes, with the incentive for new imports reaching a 1-month high of $53 per Troy ounce, ten times its recent 5-year average.
European stocks slipped 0.1% on the continent-wide Stoxx Europe 600, clipping last week's 1.4% surge ahead of European inflation data.
Gold priced in Euros rose 0.3% to €1874 while the UK gold price in Pounds per ounce edged higher 0.1% to just below £1600.
Platinum, which finds two-thirds of its demand from industrial uses led by auto-catalysts to cut carbon emission from fossil-fuel engines, steadied above $900 per ounce after climbing 3.7% last week from multi-month lows, cutting  platinum's discount to gold prices further from the all-time gap recorded early February at $1153.
Sister metal palladium – which finds well over 4/5th of its end-use demand from autocats –also fell back, cutting last week's 10% surge from new 6-year lows to trade $40 cheaper at $945 per Troy ounce Monday.
US stock and bond markets were closed for Presidents Day, as were Canada's market for Family Day.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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