Article / 11 October 2016 at 13:06 GMT

Gold puts up a fight against rising dollar – #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Gold's robustness may signal end of long-liquidation
  • Gold is down against the dollar but up vs the euro
  • Tactical traders such as hedge funds reducing bullish bets
  • Investors using ETPs are once again buying into weakness
  • Headwind from stronger USD will  keep the upside limited
usd gold
 The stronger dollar hurt gold today – but not seriously. Photo: iStock

By Ole Hansen

The dollar reached an 11-week high  against a basket of currencies today as the focus returns to higher Fed funds and rising bond yields. Gold has held up relatively well against this onslaught which could be a sign that fund long-liquidation has begun to fade. 

Gold drivers

While being down against the dollar gold is actually trading higher today against the euro as the inverse correlation has faded somewhat. Funds were heavy sellers on the break below $1,300/oz last week, so much that the net-long in the week to last Tuesday, the day of the initial selloff, dropped by 22% to 205,000 lots. Still one-third above the low point reached during the May correction some additional selling has been seen since with the aggregate open interest in Comex gold futures falling to the lowest in four months. 

So far we have seen a repeat of the May correction with tactical traders such as hedge funds reducing bullish bets while investors using exchange traded products once again buying into the weakness. Since the break below $1,300/oz. total holdings in ETPs have risen by 13 tonnes to 2,046.4 tons, the highest in more than three years. 

Gold investments through futures and ETP
The selling pressure may have subsided for now but the headwind from a stronger dollar will continue to keep the upside limited. Support at $1,250/oz was briefly broken last week and a close below may signal additional weakness towards the May correction low at $1,200/oz.

Spot gold with retracement levels
 Source: Saxo Bank

– Edited by Clare MacCarthy

Ole Hansen is head of commodity strategy at Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail