Gold Set to "Test $900" as Banks See "No Reason to Buy", Speculators Trim Position

By Adrian Ash, GoldSeek

London Gold Market Report

THE PRICE OF PHYSICAL GOLD reversed an early $4 drop on Monday morning in London, recovering last week’s finish at $913 an ounce as Asian stock markets ended the day sharply lower but European equities ticked higher.

Priced in Euros, gold bounced higher from a new 3-month low of €651.30. US crude oil contracts held below $60 per barrel.

“A test of $900 an ounce in Gold is on the cards in the near future,” reckons UBS metals strategist John Reade in London, citing low jewelry demand, falling Gold Coin sales, and a lack of new inflows to trust-based gold ETFs.

New data released on Friday by US regulator the CFTC – which also confirmed it wants to set position limits on gold derivative traders, alongside ‘anti-speculation’ caps on oil and grain dealing – showed hedge funds and other large speculative players cut both their bullish and bearish bets on the Gold Price last week.

Overall, that left professional speculators’ net long position in Gold Futures and options little changed, standing more than a third above its 5-year average at the equivalent of 532 tonnes.

The SPDR listed in New York meantime shed 10 tonnes of Gold Bullion last week, taking the volume of gold used to back its ETF shares just below 1,110 tonnes.

“There are fewer and fewer reasons to Buy Gold,” says fund manager Tetsu Emori at Astmax Co. in Tokyo, speaking to Reuters today.

“Those investors who helped push up the market are now done with buying, and there is little need to turn to gold as the Dollar is preferred as a safe haven,” he said.

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