What's next for gold after its best quarter since 2017?
Head of Commodity Strategy
Summary: Trump's trade war and the strong dollar weighed heavily on many commodities in 2018 but these factors also sparked a rush into safe havens, causing gold to shine.
Growth, and with that demand worries, caused by President Trump’s trade war with China, rising dollar funding costs and a generally strong dollar, helped send growth-dependent commodities, such as industrial metals sharply lower while creating renewed demand for safe havens, especially gold and with that also silver together with the minnow of palladium where tight supply has lent strong support.
The table below highlights these developments and the impact on investor behaviour. Those looking for a longer-term bet on gold tend to use exchange-traded funds and this sector saw the biggest increase in total holdings since Q1-2017. Hedge funds, meanwhile, which in early October held a record net-short in COMEX gold futures of 10.3 million ounces, finally turned net-long at the beginning of December. Please note that due to the US government shutdown the CFTC has so far not been able to publish data covering the week the December 24. It is very likely given the current stalemate between Trump and Congress that the report covering the final week of 2018 will also be delayed beyond the usual publication date this Friday.
Spot gold is currently testing $1,287/oz, the 61.8% retracement of the 2018 sell-off. While the 14-day RSI at 75 points towards the need for consolidation a break above is nevertheless likely to attract additional momentum buying. While the current hedge fund position is unknown the relative small net-long on December 18 is likely to have increased further into the quiet Christmas and New Year trading period.
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