Gold eased a bit to start out the week at 1333.60 as traders booked profits and global tensions seemed to ease back from the edge. Silver reacted a bit harsher giving up 154 points to trade at 21.307 while platinum eased by $6.70 to trade at 1508.95 well above its average trading range. Gold prices remained flattish on Friday as investors grew less worried about Portugal’s top listed bank, but the precious metal notched its sixth straight weekly gain as many remained concerned about violence in the Middle East.
Traders said dollar bulls are unlikely to get too excited ahead of Yellen’s testimony on Tuesday and Wednesday. “If her recent public statements are any indication, expect no discomfort from the current stance of accommodative monetary policy,” analysts at JPMorgan wrote in a note to clients. They also expect Yellen to defend the principle that financial stability should remain primarily in the remit of regulators, while central banks should focus on macroeconomic stability.
Goldman Sachs isn’t backing down from their bearish call on gold. As bullion’s 11 percent rally this year beats gains for equities, commodities and Treasuries, they are sticking with the view that the metal will be lower by the end of December as the economy improves.
Gold added 1.3 percent last week to 1,337.40 a sixth straight advance and the longest streak since August 2011. The net-long position in gold rose 5.4 percent to 144,272 futures and options contracts in the week to July 8, according to U.S. Commodity Futures Trading Commission data. That’s the highest since November 2012. Short holdings have fallen for five straight weeks. After 12 straight years of gains, gold tumbled 28 percent in 2013 as an equity rally prompted some investors to lose their faith in the metal.
Not many traders picked gold as a top performer at the start of the year, but the metal has gained for the past six weeks in a row. One reason for gold’s recovery has been that the world has remained an unpredictable and dangerous place. Having initially risen with the outbreak of near civil war in Ukraine, gold has again been seen as a safe haven from the Sunni/Islamic uprising in the north of Iraq and the possibility that arose this week that Israel may invade Gaza. The geopolitical uncertainty had a new financial addition with the threat of a banking crisis re-emerging in Europe as shares in Portugal’s Banco Espirito Santo (BES) were suspended after one of the subsidiaries of the group that controls the bank missed debt repayments. Gold touched 1,345, its highest since March after worries about the financial stability of Portugal’s largest listed bank Banco Espirito Santo hammered equities and stoked fears of an European banking crisis.
“The Portugal fears have subsided as markets don’t think it is going to be another widespread crisis,” said one trader in Tokyo. “However, the safe-haven demand for gold is still there due to the tensions in the Middle East. Portugal was only one reason for safe-haven bids, the geopolitical situation has not changed,” the trader said.