GOLD PRICES fell to $1325 per ounce Monday morning in London, retreating as world stock markets edged up to new all-time highs after the weekend’s failed military coup in Turkey, writes Steffen Grosshauser at BullionVault.
Holding above last Thursday’s 2-week low, gold prices traded 0.6% below late Friday’s spike, made as the initial news broke during the typically quiet end to US electronic trading after the New York Comex closed.
With over 200 dead, 3,000 soldiers arrested together with as many judges and lawyers, and a further 8,000 police officers suspended, the Turkish government blamed the attempted coup on supporters of exiled moderate cleric Fethullah Gulen.
Gulen in turn accused President Tayyip Erdogan’s government of launching the coup as a ‘false flag’ operation, the better to start a putsch against opposition leaders.
Gold prices ended Friday with the first weekly decline in seven as stronger US retail sales and an uptick in consumer price inflation saw traders grow their betting that the Federal Reserve will raise interest rates at its September meeting.
The central bank’s next economic policy meeting will take place 26-27 July. http://www.bloomberg.com/news/articles/2016-07-18/gold-extends-decline-a…
“The better US data on Friday clearly got people starting to think the Fed could actually hike this year,” says Wayne Gordon, executive director for commodities and foreign exchange at Swiss bank and bullion market-maker UBS.
“It’s not something that the market has priced, but certainly it will be a negative event for gold.”
“The market has yet to deal with the political uncertainty going into the 8 November [US] presidential election,” counters Benjamin Wong, foreign exchange strategist at Singapore’s largest bank DBS, which also foresaw this year’s gold rally.
“Gold has seen four major bull markets since 1970: this is another one.”
Hedge funds and other money managers last week cut their bets on a rising gold price and grew their bearish bets as a group, new data showed late Friday.
That trimmed the “Managed Money” category’s net speculative position in Comex gold futures and options from start July’s latest new all-time record high.
Chart of CFTC data on Managed Money category of Comex gold futures and options positioning
The SPDR Gold Trust (NYSEArca:GLD), the world’s largest exchange-traded gold-backed trust fund, also shrank as shareholders sold, cutting the bullion needed to back the trust fund’s value by 1.9%.
Taking the GLD down below 963 tonnes of backing, that was the sharpest weekly outflow since the trust shrank to 6-year lows when the US Fed finally raised its key interest rate to 0.50% last December.
The world’s largest silver-backed ETF in contrast – the iShares Silver Trust (NYSEArca:SLV) – grew another 2% last week towards new 5-year records above 10,842 tonnes.
Silver tracked and extended the drop in gold prices on Monday however, falling back below $20 per ounce – a 2-year high when first reached on July 4 – with a 1.7% loss from the weekend.