With the Fed’s dampening market speculation wherein the a cut in stimulus is very imminent is already leaving the gold bulls to be justified. Gold was able to manage a rally short of just 7 % in the previous weeks which includes the 2.65 % or $34 increase since the Oceana and Asia opened their trades this week. judgement as to whether US policy makers will continue to wind down in its stimulus programme in the succeeding months has allowed the commodity to continue its two-week hefty gains in almost 20-consecutive months.
It was only in the second quarter that the market really experienced the commodity bundle prices to free-fall as some of investors lost faith in the metal’s store-of-value. The market price action is warning investors that the Fed wants to see tangible improvements in the economic conditions even before policymakers begin tampering with the existing inadequate policies regarding the underlying support for gold. Moreover, a softer dollar is alleviating the commodity bundles price dilemma.
Te previous week’s CFTS data revealed that speculators are increasing their net-long position by up to 56 % to as much as 55,535 worth of futures and options contracts. This is the largest recorded long recorded position since last year. Moreover, the report also showed that the net-bullish wagers across 18 US-traded commodities leaped plus 28 %, its highest gain since the first quarter this year. Much of the gain in the net-long position is highly attributed in the short holdings, which slumped 61,002 contracts from the previous 80,147 level.
Last week, the yellow metal briefly landed at the $1,300 in the futures market which gained plus 1.3 % by this month and capped the first back since the first quarter this year. Year-to-date, the metals prices have slipped -24 % wiping just under -$60 billion from Exchange Traded Products wherein a lot of investors have lost faith in the commodity as a store-of-value.
It’s not as if the markets are becoming entirely wholly bullish all of a sudden, the longs have not reached that far ahead. In reality, the overall short positions were at a record and it was only a matter of time that with enough good reason, the bears will eventually would want to recover. The dollar provided the impetus and for many, it seemed that investors became rather complacent in their position of gold as it went up for so long and the bears can feel rather justified in this month’s price action.
In a recent Reuter’s independent study revealed that spot gold price average is $1,410.75/oz. this year which was way below the positively forecasted $1,627 three months ago. Moving forward, the gold prices are expected to remain relatively weak as the Fed commences the scaling back of its quantitative easing and the rise of dollar.