ETP Holdings In Gold, Silver Reduced Despite Rally
Saxo Bank | Jan 06, 2014 06:06AM ET
The positive beginning to 2014 for precious metals did not trigger much cheer in the world of exchange traded products where holdings were reduced across the four metals tracked in this report. This could indicate that the primary driver behind the rally seen so far, especially for gold, has been driven by short covering in the futures market and strong physical demand out of China.
The weakness in gold seen towards the end of 2013 has so far been pushed aside as news about increased demand from China and potentially India together with short covering from hedge funds has more than offset a continued lukewarm response from investors trading gold through ETPs. In China, the premium paid for taking immediate delivery of gold has stayed elevated above USD 20 per ounce the past few days while in the futures market, hedge funds have been scaling back gross-short positions which stood near record highs as 2013 came to a close.
Silver has remained rangebound since November and as a result, we have seen holdings being reduced in seven out of the past eight weeks. A clear break to the upside above current resistance at USD 20.51 per ounce now seems necessary in order to change the current sentiment towards risk reduction.
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