Gold without a story: why big money is waiting until January

Gold is holding its gains, but nobody seems sure why it should go further. Kotak Neo had spot gold at $4,120.48 an ounce at 10:56 India time on Tuesday 10 November, after a 1.7% rise on Monday and 5% the week before. Brent crude had slipped to about $92 a barrel, it reports, and hopes for progress in US-Iran talks had grown since the midterm elections.

The same report cites a market strategy note describing gold’s near-term outlook as “moderately bullish to sideways” through year-end, with weak conviction and major investors said to be on the sidelines until January. The note is not named in the report.

Oil has been the story

For most of this autumn, gold has moved against oil. Higher crude raises inflation expectations, which keep the Fed tightening, which raises the cost of holding a metal that pays no interest. Cheaper oil loosens that chain. Kyle Rodda told Reuters, in a story carried by Business Recorder, that if the US keeps avoiding escalation in the Middle East, lower oil would help gold through the dollar, inflation and rate expectations. The full mechanism is in Why cheaper oil is gold’s new best friend.

The weakness of that story is that it depends on a ceasefire holding. It does not give investors a reason of their own to buy gold, which is what “without a narrative” means in practice.

“Moderately bullish to sideways”

Read literally, it means the note’s authors see more chance of gains than losses, but expect most of the period to be range-bound. On Tuesday, Rodda called the day’s dip “just a bit of churn.” With the Fed hike priced at 84% according to CME’s FedWatch tool, as Business Recorder reports, the rate side is not offering a reason to buy either.

Who is trading now

If large allocators are waiting, the moves are left to others. The latest data show two groups going in different directions. The World Gold Council says long-term ETF holders kept adding in October, taking holdings to a record 4,275 tonnes, while net long positions on COMEX fell 94 tonnes to 560 tonnes, the lowest since late July. Physical buyers are the third group: investingLive reported that Indian demand picked up at the start of the festival season as lower prices drew back bargain hunters (see Diwali gold rush?).

A market with thin conviction and fast traders can move further on a single data point than its fundamentals would suggest, in either direction. Tuesday’s CPI report and Friday’s producer prices are the next such points (CPI day).

For individual investors

This site does not give advice. What can be said is that a directionless period is when the reason for owning gold matters more than the price. Our guide to what moves the gold price sets out the forces involved, and the gold price page has the current figure.

Every figure here is as reported by the publications listed under Sources, at the time they reported it. Prices move; the live gold price has the current one. Nothing on this page is investment advice.