By Frik Els
On Monday gold continued to tread water with December futures trading on the Comex market in New York exchanging hands at $1,332.50 an ounce in European trade.
Gold has now given up most of the gains wracked up last Tuesday in response to weak US economic data and the prospect of a delay in interest rate hikes in the world's largest economy.
Tuesday was the best one day gain since June's Brexit poll surprised markets – when a reading of economic activity from the US Institute for Supply Management fell to its lowest level since February 2010. Higher rates boosts the value of the dollar which usually moves in the opposite direction of the gold price and gold has a close negative relation to government bond yields.
Gold touched a two-year high in July around $1,380 an ounce and year to date the metal is up 25% or $270 an ounce, one of its best annual performances since 1980.
Large scale gold futures and options speculators or "managed money" investors such as hedge funds were wrong-footed by the negative employment and ISM numbers and had been positioning themselves for further declines in the gold price in the run-up to Federal Reserve rate hikes later this year.