Large speculators and hedge funds have become the most bearish on gold in the last month. Net-long positions in gold fell 8.3 percent to 94,329 futures and options contracts as of May 13, according to the commitment of traders data provided by the Commodity Futures Trading Commission (CFTC). Net-shorts were boosted ten percent to 31,283 contracts, the highest since February. Nevertheless, the differential still leans to the bulls.
Analysts still will not give up on the hopes that the United States is in recovery mode. Wells Fargo Advisor’s Sameer Samana, senior international strategist, said “all the leading indicators would at least suggest solid and firming U.S. growth.” However, many believe the primary indicator leading the economy is the Federal Reserve, and the US central bank still feels the need to buy at least $45 billion in assets per month and undergo an indefinite period of near-zero interest rates.
Gold futures have been largely range bound, and price action has been flat ahead of Wednesday’s FOMC minutes statement. Market participants expect an additional $10 billion to be tapered of the current $45 billion in monthly asset purchases. Gold will likely have a knee-jerk reaction lower on the news, but it will be important in how the Fed describes the economy and growth going forward. Any signs of weakness, and gold could see more upside.
The monthly 4H chart shows gold trading within a symmetrical triangle and trading along the supporting trend line. $1,292 will be an important support line, and a close below will signal a further move to $1,281 before seeing the next wave of demand. Conversely, price action will need to go through $1,300 per ounce and the 200 EMA before challenging the resistance trend line. However, a close above this level could send price action to $1,311/16.