Commodity-sensitive currencies did not garner much love from "yellow metal" this week. The latest loonie and aussie price moves appear to have decoupled themselves ever so slightly from gold prices. The commodity looks to be ending the week rallying to their best levels of the current countertrend advance since the metal lows were set back in late June.
It's looking like gold demand is shifting from the West to the East again. It's mostly speculators who seem to be closing out their short positions who have driven the recent price rally. In the second week of August, money managers closed about +3% of their long positions, but closed +17% of their short positions. It's been reported that the gold bars from the ETF outflow have been travelling to Switzerland, and are then re-melted into smaller size bars and coins to be used for sale into Asia (mainly China and India). Analysts had been expecting Indonesia's gold jewelry demand to jump to +30% this year as income rises and the citizens catch up on the latest fashion trends. The number will likely be revisited especially now that the emerging markets have come under increased selling pressures of late -- equity market capitulation.
Canadian data on Friday revealed that inflation is now gradually climbing from the depths of earlier this year (+0.1%). However, it remains non-threatening. The steady decline in the CAD will add to the mild upward pressure in inflation, but a sluggish underlying growth profile, coupled with slow wage growth, will contain most of the upswings. Corporate dollar buyers continue to lurk sub-1.0500, while sellers hold steadfast at 1.0600.