Gold prices are hovering and funds have fled, and the pressure on the future market is likely to intensify, but there is still a glimmer of life

In early Asian trading on Tuesday (December 7), spot gold returned to above $1780 / ounce, but the overall trend is still in a narrow range. Suki Cooper, a precious metals analyst at Standard Chartered Bank, said the latest challenge for gold prices was concerns about Omilon, coupled with a weaker physical market and a more aggressive Fed. With gold unable to hold above $1800 an ounce, bullish speculative interest has fallen to a one-month low. Analysts expect gold prices to come under further pressure in December as physical demand gradually retreats, although expectations for fed rate hikes could turn around for gold.

Standard Chartered Bank: Gold is hovering between the two forces, and gold is under more pressure this month

Standard Chartered said the gold market was between two opposing forces that kept gold trading in a range of between $1,750 and $1,850 an ounce.

Suki Cooper, a precious metals analyst at Standard Chartered, said on Monday: "On the one hand, the Fed's interest rate hike expectations have slowed due to the news of the Omicron variant, and the risk of stagflation has triggered safe-haven demand for gold, on the other hand, the spot market has weakened due to weakening seasonal demand, while concerns about the acceleration of interest rate hikes remain." Copper noted that due to continued volatility in the stock market, gold prices have shifted from a reverse trend with the DOLLAR to more closely following the trend of inflation and real yields.

Cooper said: "Recently, gold has begun to track real yields more closely than the US dollar. While this should provide greater upside risk to gold prices over the medium term, confidence remains low in the near term.

First, investors saw gold prices build up some bullish momentum after the Fed's dovish meeting in November. However, that positive trend disappeared after Fed Chairman Jerome Powell was re-nominated and talked about discussing more aggressive curtailment plans at the upcoming December meeting.

Cooper explained that tactical positioning is also putting pressure on gold in the short term. "Gold prices were under pressure until the Opicron variant appeared, and investors have begun to close long positions," she said. In physical terms, after a recovery last fall, demand is likely to decline slightly in December. However, demand for the Chinese New Year will be a boost during the winter months.

Cooper said: "Gold's November rally was also accompanied by seasonal demand, providing a strong support for prices. However, by December, this demand will begin to wane. The latest trade data from major consumer countries highlight the strength of the spot market in October, with preliminary data indicating that india's demand remained strong in November. But India's home-grown premiums retreated in early December. “

Standard Chartered expects gold to close around $1,825 an ounce this year and rise to $1,875 an ounce in the first quarter of next year.

Hedge funds abandon gold long bets, and excessively high interest rate hike expectations may bring hope

As the Fed wants to tighten monetary policy faster than expected to counter the growing threat of inflation, hedge funds and fund managers continue to close their bullish gold positions. According to the Commodity Futures Trading Commission (CFTC), bullish speculative interest has fallen to a one-month low as gold prices cannot sustain gains above $1,800 an ounce.

The Commodity Futures Trading Commission (CFTC), which categorizes the Trader Commitments Report for the week ended Nov. 30, shows that fund managers reduced speculative long positions in Comex gold futures by 14,804 lots to 137469 lots. At the same time, short positions decreased by 1550 lots to 45384 lots. The net position in gold is currently 92,085 lots, down 12.5% from the previous week. During the survey, the gold market was relatively volatile, with gold prices briefly breaking through $1800 an ounce, but unable to withstand new selling pressures.

Nicky Shiels, head of metal strategy firm MKS PAMP GROUP, said there had been a 5 million ounces outflow from the gold market over the past two weeks. "The last time a large outflow of long positions was in February 2020, when positions were near high and hedge funds sold early before the coronavirus pandemic," she said in a note on Monday.

Shiels added that gold investors are also fleeing gold-backed exchange-traded products, as well as long-term liquidations of CME futures. "The outflows of money over the past two days were around 125,000 ounces and 200,000 ounces, respectively, adding some concern to the bullish view, especially at the end of the year, when the position situation is relatively more volatile," she said.

Ole Hansen, head of commodities strategy at Saxo Bank, noted that gold prices have failed to attract any bull attention as rising inflation has led the market to expect more aggressive rate hikes next year.

The latest data from the Chicago Mercantile Exchange (CME) FedWatch Tool shows that the market not only expects the Fed to start tightening interest rates by June, but also expects four rate hikes next year.

However, not all analysts are abandoning gold. Commodity analysts at TD Securities noted that market expectations for next year's rate hikes are too high, which could be positive for gold prices. Analysts said: "As the Fed accelerates its debt purchases and the market feeds on more than three rate hikes in 2022, the risk balance of gold positions is shifting upwards." If gold breaks above $1795 an ounce, CTA bearish retracement could eventually push gold higher. ”

Spot gold returned above $1780/oz on Tuesday (December 7), but the overall trend remained in a narrow range. Investors will be watching Friday's U.S. CPI inflation data closely for clues about the Fed's tightening of the pace of monetary policy.

This article originated from Huitong Network