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Gold is trading back to the 200-day moving average on fresh length being built in the SPDR Gold Shares ETF (GLD) - Get Free Report , as well as futures. The gold net-long positions through today will probably be the most bullish since May.

The strength in gold equities is actually leading the underlying gold price, with consolidation rumors in the sector helping a bit. Silver futures net length is increasing as well, but $16 seems to be difficult for silver to hold onto at the moment, with weak industrial demand and byproduct hedging from producers keeping a lid on the price.

Despite a strong closing hour on the Shanghai equity market, the base metals are having a difficult time holding any rally. Copper, which hit a double to pat $5,360 per ton last week, is headed back to the 50-day moving average of $5,175. The recent tightness in the copper spread has eased and is more reflective of subdued physical activity. Zinc, which had a 10% one-day rally on the announced Glencore (GLNCY) 500,000-ton cutback, is in retreat once again. Both Vedanta and Hindustan Zinc have announced increased expenditures to expand zinc production.

Aluminum continues to be hovering near multiyear lows of $1,506 a ton, and in renminbi (RMB) terms, aluminum futures did break 11,000 RMB, making a new low on the Shanghai Futures Exchange. Both alumina costs and energy costs continue to fall, so it is doubtful we will see any Chinese smelters cut production despite high domestic inventories.

Lastly, despite announcing cutbacks from low-efficiency plants in July, Vale (VALE) - Get Free Report announced record quarterly production of 88.2 million tons of iron ore. With steel demand in China slowing down as northern China heads into the winter, demand for construction in the region will keep steel and iron ore prices under pressure.

At the time of publication, Cross had no positions in the stocks mentioned.