Quantifying trader exposure to gold, which has started the yr with a clear correction, the CFTC said the net spec long position fell to the lowest level since July ’09. The main catalyst for the gold pullback, in addition to the needed consolidation of its gains, is the rise and prospect of broader jumps in interest rates, whether central bank induced in Asia and Latin America or market based in Europe and the US. Gold loves cheap money and the prospect of less cheap money is having its impact on its price. With this said however and to specify, gold really loves negative real interest rates and from what’s been seen so far in China for example, inflation rates will remain above the rate of interest rates. China and other Asian countries have so far been reluctant to aggressively hike rates relative to the rise in inflation and gold will eventually resume its rise when markets realize that inflation will outpace the rise in central bank rates.
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