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Strong US data has weighed on gold, putting pressure on recent longs. CFTC data as of August 2 showed that net longs increased by 2moz bringing net length to 35.64moz or 96% of the record. Interestingly, part of the gains was offset by shorts adding to positions for the first time in a month. Higher-than-expected US nonfarm payrolls last Friday likely attracted some additional shorts. The challenge for gold in the near-term is a stronger dollar and positive risk sentiment on the back of recent strong US data.
A rise in front-end yields heading into Fed Chair Yellen's speech at Jackson Hole on 26 August could weigh on gold. We would regard any further weakness up ahead as a potential buying opportunity, given our view that the macro story remains intact.
Despite potential near-term support for the dollar, we maintain our view that it has likely peaked against DM currencies. Our view for lower real rates is unchanged, and therefore continues to be supportive for gold.
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