Similarly to Monday, yesterday’s afternoon auction showed a strong buying imbalance. On what was otherwise a relatively quiet, low volume day, the market quickly shot up 12 USD/oz with 1.5m oz worth of futures going through during the time of the fix. Overnight, the market has drifted lower again with Japan out on holiday and no signs of physical buying in Asia. It seems then that the past 48 hours have been primarily driven by futures short covering. With overall positioning at modest levels however we expect that further short covering is unlikely. Positioning from discretionary feels light and in the absence of any gold specific flows we should see gold track lower as yields continue to widen.