Gold’s Challenge: Holding on to That $2,000 High When It Happens
Now you see it; now you don’t.
In a matter of hours, gold went from $2,000 an ounce at Monday’s settlement to back below the key bullish mark by Tuesday’s early trading. The close of the previous day had looked suspect anyway.
In an unusual disconnect, the spot price of gold, reflected by trades in bullion, was trailing far behind the benchmark futures contract on New York’s Comex. Typically, the difference between the two is a couple of dollars to ten in favor of futures.
But at Monday’s settlement, the gap blew out when the December futures contract became Comex’s new benchmark for gold. December gold had been hovering at $2,000 even when the previous front-month, August, swung between low and mid-$1,900 levels.
December gold settled Monday’s trade at $2,009.20 per ounce, up $9.30, or 0.5%, on the day and 4% higher for July. During the session, it hit a three-month high of $2,010.85.
The spot price of gold hovered well below Monday’s peaks in futures. It eventually closed Monday’s session at $1,964.19 — some $45 off the futures price.
At the time of writing, during Tuesday’s Asian session, December gold hovered at $1,995 while the spot price was around $1,997 — back to their usual trend.
As with gaps between futures and spot prices in other commodities, this too had been expected to converge — though the speed at which gold futures corrected suggests the yellow metal might have trouble holding on to $2,000 once it gets there again.
July was a difficult month for gold longs. The spot price came just about $2 short of breaking the $1,900 support as the dollar rebounded from 15-month lows on a renewed hawkish talk by the Federal Reserve — which had been expected to be more dovish after aggressive rate hikes carried out
Read more on investing.com
