Gold approached 1900 in European session (intraday high at 1898.6) as sovereign crisis in the Eurozone persisted. German Chancellor Angela Merkel once again resisted joint issuance of Eurobonds as a means to resolve debt problems in the region. She and her government retained the view that reducing fiscal deficits in debt-ridden countries remained the most important in the current situation. Stocks, however, advanced as the drop in Brent crude prices might help alleviate inflation pressures and economic slowdown.
At an interview with the media, Chancellor Merkel reiterated her stance that Eurobonds are not the answer 'right now' as issuance of which would require changes in the EU treaty and it would lead the Eurozone to become 'a debt union, not a stability union. Each country has to take its own steps to reduce its debt'. German Finance Minister Wolfgang Schaeuble echoed Merkel's opinion and said that the 17-naiton region would become an 'inflation community' of the members chose to sell bonds instead of strengthening fiscal policies. Wolfgang Schaeuble stated that 'unless there is a single financial policy in the euro area, there won't be a single rate of interest'.
As macroeconomic uncertainties intensified, gold's demand has been rising rapidly. Gold has rallied over the past 7 weeks despite elevated price levels. Following gold's coattail, silver also surged with the aggregate gain over the past 7 weeks surpassing that of gold. While strong investment demand for precious metals may sustain as economic turmoil and low interest rates persist, investors should remain cautious on silver's fundamentals as industrial applications of the metal will be negatively affected should global economy moderate.
Commitments of Traders
Speculators remained bearish on the energy complex in the week ended August 18. Net length for crude oil futures declined for a third consecutive week to 131 234 contracts. Net lengths for heating oil futures and gasoline futures also dropped to 12 253 and 45 928 contracts respectively. Net short for natural gas futures increased to 190 173 contracts during the week.
With the exception of gold, speculators were also bearish on the precious metal complex. Net length for gold futures declined for a second consecutive week, slipping -3 487 to 200 086 contracts. Net length for silver futures increased +3 540 to 21 928 contracts. For PGMs, net lengths for platinum futures and palladium futures jumped to 23 327 contracts 18 685 contracts and 13 044 contracts respectively.