GRAPHIC-Gold prices surge but rally will fail without big investors

By Peter Hobson

LONDON, Nov 17 (Reuters) – After months of decline, gold prices have shot up as markets bet that U.S. interest rate rises will slow, but analysts said institutional investors are wary and further gains could be elusive.

Gold XAU= climbed from a low of $1,615.59 an ounce on Nov. 3 to $1,786.35 this week after U.S. data showed inflation may have peaked in October and not require such high interest rates to contain it.

Hopes for a quicker end to monetary tightening dragged down the dollar and U.S. bond yields, making dollar-priced, non-yielding gold more attractive. =USD, US10YT=RR

But gold is still down around 15% from a peak of $2,069.89 in March and has faltered below technical resistance levels, falling back to around $1,760 on Thursday.

Saxo Bank analyst Ole Hansen said $1,790, a Fibonacci retracement level, was key. “A break above that level plus a move above the 200-day moving average around $1,805 would be the sign of real change,” he said.

Institutional investors have remained cautious.

Far from buying gold, exchange traded funds (ETFs) storing bullion for many large financial investors have sold around 20 tonnes this month, data from the World Gold Council show.

And the latest COMEX exchange numbers show that as of last week, speculators in U.S. gold futures were betting on lower prices, though the number of such bets had declined. 3088691MNET

Short covering rather than money wagered on higher prices appeared to be behind gold’s rally, said Ross Norman, an independent analyst. If that’s the case, he said, “watch for momentum fade”.

Demand for gold from central banks, Asian consumer markets and buyers of retail gold bars and coins has been extremely strong this year, the World Gold Council said.

But financial investors tend to have the greatest power to move prices. Their selling has pulled gold down in recent months.

Until it is clearer that inflation really has peaked, the dollar could easily strengthen again, pressuring gold, said Gianclaudio Torlizzi, a partner at consultants T-Commodity.

“In the medium term, gold should go higher,” he said. “(But) I would stay on the side-lines for now.”

Global gold demandhttps://tmsnrt.rs/3DNjm5D

Speculative positioning in goldhttps://tmsnrt.rs/3tIAm72

Gold prices and ETF holdingshttps://tmsnrt.rs/3ghtXwL

Gold technicalshttps://tmsnrt.rs/3tJQrcF

(Reporting by Peter Hobson; editing by Pratima Desai and Barbara Lewis)

((peter.hobson@thomsonreuters.com))

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