Gold is sticking to a narrow trading range around $1,200 (Dh4,406) an ounce even after holdings in bullion-backed exchange-traded funds plunged to their lowest in a year.

Bullion for immediate delivery was 0.2 per cent lower at $1,198.74 an ounce as of 11.29am in London. In the last month, gold has traded within a range of about $31, with a high of $1,214.35 an ounce and low of $1,182.86 an ounce.

The metal is “continuing its slow dance around $1,200,” Carlo Alberto De Casa, chief analyst at London-based brokerage ActivTrades Ltd, said in a daily note.

The range has stuck even as holdings in bullion-backed ETFs dropped to about 2,104 metric tonnes, the lowest since September 20, according to data compiled by Bloomberg.

Leveraged funds also built up a short position on futures and options combined as of September 4 that was the biggest in data going back to 2006, according to the US Commodity Futures Trading Commission. The most recent data, for the week through September 11, showed only a small reduction in net bearish bets.

‘Range-Bound’

“Gold has remained range-bound around $1,200 for the past month during which time it has managed to absorb continued selling from futures and ETF investors,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “It does indicate that some underlying demand has begun to emerge but in order for the price to progress to a point where short sellers begin to worry, it needs additional support from a combination of a weaker dollar and lower stocks.”

Gold has struggled to find traction for much of the year, with investors favouring the dollar as a safe-haven asset. The dollar’s strength since late April in particular has held back any potential advances in the gold price despite potential triggers ranging from political uncertainty in Europe and the expanding global trade tensions.

Still, traders and analysts of the precious metal have held a majority bullish outlook for the last four weeks, according to Bloomberg’s weekly survey.

“We have not had a big dollar move for nearly four weeks now so I think we are due one soon,” Hansen said. For gold, “I think the risk is skewed to the upside given the market’s recent ability to absorb price negative news.”