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Gold price driven strongly by speculation

Gold is somewhat firmer at a good $1,130 per troy ounce as the new weeks gets underway, no doubt partly thanks to the weaker US dollar. In euro terms gold is holding its own above the €1,000 per troy ounce mark, notes Commerzbank. As the CFTC's statistics on the positioning of speculative market participants show, the rise in the gold price to $1,170 was driven to a large extent by speculation: in the week to 25 August, money managers expanded their net long positions by just shy of 33,000 to 40,600 contracts. This was primarily attributable to the covering of short positions, which fell to their lowest level in twelve weeks. 

The price increase thus proved itself to be unsustainable, and net long positions are likely to have been reduced again somewhat in the meantime, says Commerzbank. Speculative financial investors have retreated from palladium again after having built up positions in the interim. At 5,700 contracts, net long positions are at their lowest level in three years. The sharp fall in price to a good $520 per troy ounce up to mid last week was also speculatively driven, in other words. 

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