GOLD BULLION held in a tight range around $1210 per ounce Wednesday in London as the US Dollar edged back from 3-week highs ahead of today's release of minutes from the Federal Reserve's late-April meeting.
The Euro bounced off its lowest level of May so far at $1.1062, curbing the gold price in Euros just below Tuesday's 3-week high of €1092 per ounce.
Silver prices tracked gold bullion, rallying from a second dip in two days below $17 per ounce – a 5-week high when broken last Wednesday.
World stock markets held flat and US Treasury bond yields slipped as prices ticked higher before the Fed minutes.
"Until the US economy is unambiguously robust enough to allow the Fed to hike [without] a market or macro shock," says a note from Bank of America Merrill Lynch's chief investment strategist Michael Hartnett, "the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes.
"For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid-2015."
Bullish contracts on the SPDR Gold Trust (NYSEArca:GLD) – the world's largest exchange-traded gold backed trust fund – were "among the most heavily traded" equity options in New York on Tuesday, according to the Wall Street Journal.
"The flow that we've seen on GLD is [from] multi-asset managers," the WSJ quotes Swiss bank UBS's head of Americas equity derivatives strategy, Rebecca Cheong.
Giving buyers the right to buy GLD shares below future prices if they go up, the derivatives contracts "[are] a tail hedge," Cheong said.
Shareholdings in the GLD itself, in contrast – favored during the bull market by so-called "real money" managers buying assets at full price rather than using leverage – held unchanged Tuesday at a 4-month low, having dropped for 3 weeks running.
Reviewing how mutual funds have changed their GLD holdings since just before the gold-price crash of 2013, "Non-fund ETF holdings fell earlier and more quickly than [mutual] fund holdings did," wrote Mitsui Global Precious Metals analyst David Jollie last month in a special report.
"Changes in non-fund holdings of GLD have [also] been very closely correlated to movements in the price of gold itself [as] these investors have simply bought into price strength and sold in periods of price weakness."
The GLD ended Tuesday needing 718 tonnes of gold to back its shares in issue, barely half the peak holdings of 2011-2012, and down some 55 tonnes from February's top.
Russia's central bank added 10 tonnes to its bullion reserves in April, it said Wednesday, growing its gold holdings above 1,247 tonnes.
"Gold wiped out over 3 days of gains" on Tuesday, notes bullion market maker Scotia Mocatta's technical strategist Russell Browne, but "only a move back below $1201 would shift our bias from bullish to neutral."
Gold prices, agrees Stephanie Aymes at fellow market makers Societe Generale, are "undergoing a consolidation similar to late last year price action.
"The up move is likely to continue. Short term retracement should be floored at $1205."