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Gold will rebound from recent falls as a result of easing investor selling and improving Asian demand, Commerzbank said.
The yellow metal's recent weakness, with prices slipping to a four-month low of US$1,251.75/oz on October 14 from September's US$1,326/oz average, was driven by speculation to a major extent, the German lender said.
Net long positions fell by about 42% or 106,000 contracts in the last two reporting weeks – the most pronounced reduction in a two-week period since the data series began 10 years ago, it added.
"We believe that this will ease the selling pressure from this side, however," Commerzbank said. "What is more, because we assume that gold demand will pick up in Asia in the coming months, we expect the gold price to stabilize and then recover."
The bank's bullish outlook contrasts with that of ABN AMRO, which expects gold to fall to US$1,100/oz by end-1H17, due to further investor selling.
Gold closed US$3.05 higher at US$1,254.80/oz in London, with silver ending seven cents lower at US$17.40/oz.