By Brendan Conway
How did gold’s price manage five straight weeks of gains? Some would point to hints that inflation is finally creeping into prices. Or they could point to continued dovishness at the Federal Reserve.
It all matters. Just don’t forget about the return of old-fashioned speculators and their ability to drive up prices (or, later, sink them).
There was a 20% increase in speculative gold positions in the futures and options markets during the week ending July 1, the latest Commodity Futures Trading Commission data shows. Commerzbank’s commodity strategists write this morning that the trend is similar for silver:
Net long positions in silver were stepped up by 48% to 36,200 contracts – three weeks ago positioning here was still net short. In the case of both gold and silver, this was due to a simultaneous increase in long positions and the continued covering of short positions. That said, this puts the latest rise in the prices of both precious metals on a shaking footing, and correction potential has built up. If there should be further profit-taking on the part of short-term-oriented financial investors, we would doubtless see declining prices. Platinum and palladium also saw their net long positions increased: at 40,000, platinum contracts have nearly reached their record level of 16 months ago.
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