Market Nuggets: Speculative Interest In Gold At Record High - R.J. O’Brien

23 September 2010, 10:18 a.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/

(Kitco News)- R.J. O’Brien & Associates reports total speculative interest in gold, when combining exchange-traded-fund holdings and Comex net length, stands at a record 94.8 million ounces. ETF holdings are at a record 65.1 million, R.J. O’Brien reports. The Comex net long position rose by more than 7 million ounces in the last six weeks to 29.7 million. Investment demand remains strong. “The rallying cry in the bullion market is now ‘$1,300, here we come!’ Then after that, who knows, $1,350 and $1,400; both figures are possible given the weight of money flowing into this market.” R.J. O’Brien recounts how the causes of the investment demand have changed over the years. In the past, much of the interest was playing gold against dollar weakness, especially from 2005 to 2008, R.J. O’Brien says. But in recent months, the negative relationship between the dollar and gold broke down, with both rallying together in the first half of 2010. “This in turn reflects the European sovereign debt crisis and the increasing distrust of all paper currencies, not just the dollar.” R.J. O’Brien also notes that gold is in “such a well established uptrend that technical trading funds and CTAs are constantly moving in and out on the buy side.” The interest should reverse whenever there are signs of a strong global economic recovery and rise in interest rates to “normal” levels. “But,” R.J. O’Brien says, “neither of these two events seem likely to occur any time soon!”

By Allen Sykora of Kitco News; asykora@kitco.com