NEW YORK (Scrap Register): The long liquidation in gold futures of more than 106,000 contracts during the last two reporting weeks amounts to 331 tonnes of gold – albeit only on paper – although this selling is likely to ease up, said Commerzbank.
According to the bank, traders liquidate futures positions to book profits or limit losses, often based on views of where prices are headed next. The amount in gold terms corresponds to 5 ½ weeks of global gold-mining production.
And it shows how much gold can be shifted around via the futures market. After all, the physically backed gold ETFs (exchange-traded funds) recorded inflows of a mere 14.4 tonnes in the period under review.
Based on the average ETF daily inflow of three tonnes so far this year, ETF investors would have to buy gold on 112 days of trading or for a good five months in order to offset the sales on the futures market in the two-week period under review, the bank added.
Another way to illustrate the selling would be to consider the average monthly gold imports of 70 tonnes so far this year from key consuming nations China and India.
“We believes that the selling pressure from speculative financial investors should abate, however,” Commerzbank continues.