The week ending 13 September saw bearish flows in the gold market. In the view of strategists at Société Générale, the yellow metal is higly vulnerable to short covering.

Further rate increases to come, which is bearish for gold

“The complex saw an unusual crosswind in flows as silver saw a USD1.6 bn bullish flow against a USD2.0 bn bearish flow for gold. This constitutes the fifth week of bearish flows for gold. As such, gold is extremely vulnerable to short covering as the current short positions are above the 90th percentile over the past two years.”

“Gold flows were net bearish in the period, as money managers seem to have reacted more swiftly and strongly in this market than in other precious metal markets to the higher-than-expected CPI US data released towards the end of our period. This suggested that the high-interest rate environment set by the US Fed would be maintained, with further rate increases to come, which is bearish for gold, as increasing rates depreciate the attractiveness of non-yielding assets.”