Gold extends gains after bullish week
NEW YORK (Aug 19) Gold futures were trading higher on Monday at levels unseen for two months. Gold prices are finding support in last week's increase in the gold-backed exchange traded fund SPDR Gold Trust. Moreover, stronger physical demand for the yellow metal also boosted sentiment.
Gold futures traded 0.26% higher at $1,374.60 an ounce at the time of writing, while silver was 0.19% lower at $23.280 an ounce. Silver hit its three-month high earlier today at $23.605 an ounce.
Bullion soared 4.78% during the week, closing at $1,374.90 on Friday.
SPDR holdings rise
Holdings in the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, increased to 915.32 tonnes on Friday. The volume of holdings fell under 1,000 tonnes in June for the first time in more than four years.
The precious metal may reach $1,450 an ounce by the end of this year, according to analysts who attended the India Gold Convention in Jaipur last week.
In contrast, the World Gold Council said on Thursday that overall second-quarter gold demand declined to its lowest value in dollar terms in more than three years. Demand dropped 12% in tonnage terms and was down 23% in dollar terms, the report said, adding that jewelry demand remained strong, surging 37% in tonnage terms.
Investment company Paulson & Co cut its stake in the SPDR Gold Trust by 53% in the second quarter due to lower bullion prices. Net outflows amounted to $18.5 billion in the period, representing the biggest quarterly sell-off since the first gold exchange-traded fund was launched in 2003.
Moreover, billionaire George Soros also sold his position in the trust in the April-June period, dumping almost 531,000 shares.
US employment and gold correlation
Some economic data released on Thursday supported speculations that the Fed will start to scale back its bond-buying program later this year.
The regular update on initial jobless claims from Thursday showed a decrease of 15,000 to 320,000 in the week ending August 10, from the previous week's upwardly revised figure of 335,000, the US Department of Labor said on Thursday. A reading of 335,000 had been expected.
The US central bank has tied its bond purchases program, which has pushed gold prices to record highs in past years, to substantial and sustained improvements in the labor market. Policymakers said that if the jobless rate continued to sink they would consider curbing the pace of the purchases, which currently run at $85 billion a month.
Due to this correlation between the unemployment rate and quantitative easing, gold prices are currently directly linked with what happens on the US jobs market.
