The U.S. Comex gold futures (COMEX:GCG14) have risen in four consecutive weeks and were up 3.29% year-to-date as of Jan. 21. After the U.S. holiday on Monday, the gold futures tumbled 0.81%, the largest daily decline since Dec. 30, 2013. This year, the gold futures have outperformed the S&P 500 Index (CME:SPH14), the Euro Stoxx 50 Index, and the Dollar Index (NYBOT:DXH14), which returned -0.18%, 1.54% and 1.33% respectively. The U.S. 10-year government bond yield is steady this week at around 2.82%.

Faster Global Growth and China's Growth Ease

On Tuesday, the IMF revised up its 2014 global economic growth to 3.7% from 3.6% last October as the IMF raised the growth rate of the U.S., Japan, the U.K. and China, but revised down the growth rate of some other large emerging countries such as Russia and Brazil. China's Q4 GDP momentum slowed to 1.8% compared to a forecast of 2% and 2.2% in Q3. While retail sales and fixed asset investment grew in line with expectation last year, the 2H aggregate credit in China has declined roughly 30% from the first half of 2013 because of a cash crunch among the smaller banks and the scrutiny on local debt and shadow financing. Steady economic growth in China will help support physical demand, which is the key positive driver for gold currently. Analysts estimate that Chinese gold imports exceeded 1,000 tons in 2013 and will likely be around 900 tons in 2014.

Investors Positioning Before the Next Fed Meeting

Ahead of the Jan. 28-29 FOMC meeting, investors have expected continued QE tapering by the Fed. However, the flows into gold have become more positive this year. The speculators have increased their net long gold combined positions by 7.6% during the week of Jan. 14, helped by speculators establishing fresh long positions. Last Friday, the SPDR Gold Trust, the largest gold ETF, saw the largest percentage increase in holdings since November 2011. The U.S. Mint January gold coin sales will likely see the highest monthly jump since April 2013. However, the Barclay's economists expect the Fed to focus a bit more on inflation development and expectations in 2014, which should also draw gold investors' attentions.