Gold climbed more than 2 percent on Friday on end-of-quarter short-covering, but the precious metal still posted its largest quarterly loss in at least 45 years due to selling amid fears the U.S. Federal Reserve may wind down its stimulus program. Some investors aggressively bought back their bearish bets on fears gold could rebound, while others squared their books on the last trading day of a dismal second quarter after Thursday’s 2 percent drop. Gold ended up balancing Thursday and Friday’s trading and closing at $1223. This morning gold is climbing, adding $16.75 to trade at 1240.
This week is likely to be crucial for gold prices on the back of economic releases from the US and Europe, also open interest in COMEX gold has declined while volumes have increased, which indicates investors are short selling combined with the RBA meeting scheduled for Tuesday and the ECB meeting on Thursday.
The week is starting off focusing on Chinese data. China’s state-owned mining company has said mining production is expected to increase in the coming quarter, which would increase the supply of gold in line with the current demand. The Purchasing Managers’ Index (PMI) for June retreated to 48.2, the lowest level since September 2012 and down from May’s final reading of 49.2. It was in line with a preliminary reading of 48.3 released on June 20. A reading below 50 indicates a contraction of activities while one above shows expansion. The government’s official PMI report which is often at odds with the HSBC report was less dour. It showed the index slipping to 50.1 in June from 50.8 in May, but still holding above the 50-point threshold that indicates growth.
Hedge funds and other large speculators this week cut their bet on higher gold prices to the lowest level in almost six years, according to data released Friday by the Commodity Futures Trading Commission. Gold prices fell 23% during the three months ended in June, the biggest decline since the U.S. gold futures trading began in the 1970s.
Many of the reasons to hold gold have evaporated, traders and analysts said. The U.S. economy is improving, and inflation hasn’t materialized after the Federal Reserve’s stimulus efforts. Europe’s banking system has stabilized.
Copper and the London Metal Exchange Index of six primary metals headed for the biggest quarterly declines since September 2011 amid as signs of slowing in China and uncertainty about the future of stimulus in the U.S. Metal for delivery in three months on the LME dropped as much as 1.3 percent to $6,660.50 a metric ton and was at $6,753.50. Silver is trading at 19.675 climbing nicely after being trapped in the upper $18 price late last week. Silver has gained over 20 cents this morning along with copper which is trading at 3.068 up 10 points.