30 June 2015 at 10:00 GMT
By Ole Hansen
- Stock prices fell since Friday while gold is unchanged
- Since January gold ETP holdings have been reduced
- Investments in gold ETP's reached a six-year low earlier this June
- Overall gold is being held back by the USD impact of an anticipated Fed decision
- Lower prices will be required in order to attract renewed interest from investors
While gold coins have been selling out across Europe, not least in Greece the price remain stuck within a $1170 to $1190 range. Although not impressive gold has managed to stay unchanged since Friday while other other assets such as stocks (S&P -2%, Nikkei -2.7%, Dax -4.3%) have sold off.
Which direction will gold be heading? Photo: iStock
Hedge funds added to their net-long futures position during the week of June 23 but overall the net positioning remains light. Both long and short positions however have been rising during the past month, not least the gross short which currently sits a near record.
Owners of these bearish bets have not been in any hurry to scale back despite the raised level of uncertainty. This gives an indication of the continued lackluster sentiment towards the yellow metal which has been range-bound for more than six months.
The lackluster sentiment can also be seen from gold investments through exchange-traded products. During this now long period of sideways trading total holdings jumped in January when the SNB un-pegged its currency from the Euro
. Since then however total holdings has been reduced and reached a six-year low earlier this June.
The pick up in demand from mid-June and onward ran out of steam last week and have since then been reduced despite the heightened uncertainty.
In the near-term the overall impression of gold is that it remains weak, not least given its inability to react to gold friendly news during these past few days. The uncertainty related to Greece and the risk of a "Grexit" however remains elevated and with the risk of a "Lehman" moment
still high the downside seems limited to $1163.
The lack of support seen during these past couple of days raises the risk that beyond the speculation about Greece lower prices will be required in order to attract renewed interest from investors. At this stage however we see the downside potential limited to the above mentioned $1163 ahead of $1151 as per the chart below.
Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more
– Edited by Clemens Bomsdorf
Ole Hansen is head of commodity strategy at Saxo Bank