Due to the recent economic news out of the United States, net-long positions in gold dropped 16 percent to 26,774 in futures and option contracts, according to the Commodity Futures Trading Commission (CFTC) data for the week ending on December 3. This is the lowest level since 2007 as the financial markets are debating on whether or not the Federal Reserve will begin to taper in the coming months.
Gold shorts increased 6.3 percent to 79,631 contracts, and economists are beginning to analyzing if December will hold the first rollback of the massive $85 billion per month quantitative easing program. Inflation has been a problem for both the economy and gold as it have continuously fell below the Fed’s two percent target month-after-month.
“Gold is experiencing the flip side of some of the euphoria that it had from 2009 to 2011,” said Sameer Samana, a St. Louis-based strategist at Wells Fargo Advisors LLC. This may simply be a healthy pullback as 2013 looks to be gold’s first declining year in more than a decade.
Bullion prices has declined 27 percent, but paper and derivative gold has seen huge selling pressure from funds. Holdings in exchange-traded products (ETPs) fell 30 percent in 2013, which represents $69.4 billion in asset value.
Gold seen a push higher last week and challenged key resistance at $1,255 per ounce. However, prices fell back as the precious metal waits in limbo. $1,211 has held rather well as support. It is likely that gold price will remain consolidated within this range until the FOMC meeting on December 17.
Gold may get a boost if a taper is not done in December, but traders will pay close attention to the FOMC minutes and the language from Chairman Ben Bernanke. A bullish economic outlook should continue to put pressure on gold prices.