The CFTC managed money combined total positions in gold jumped to 70,067 contracts as of July 23 from a recent low of 31,197 contracts as of June 25. The speculators believe that the Fed is unlikely to hurry the tapering.
U.S. oil production is soaring, hitting the highest level in 22 years at 7.55 million barrels a day! Oh sure U.S. oil supplies fell by 2.8 million barrels but that was mainly because U.S. refiners went on a tear producing product.
So far, physical demand has not responded as enthusiastically to the gold price drop as in April. According to Barclays, the rolling monthly volume traded in the Shanghai Gold Exchange is about 20% below the April's peak.
For the Fed's meeting, gold investors will watch out for the conditions under which the bond purchases will be reduced, the Fed's outlook for the interest rates as well as the Fed's projections of the inflation and the unemployment rate.
Gold prices jumped on Monday in reaction to the unexpected contraction in the U.S. May ISM manufacturing data to 49 from last month's 50.7, giving the market hopes that the Fed will continue its stimulus.
Bubble talks about bonds and stocks have surfaced as have the concerns that the Fed will taper off its QE program sooner than expected. Strength in physical gold demand has countered the gold-backed ETF outflows.
Gold investors are keenly watching the direction of the gold-backed ETP holdings, which fell 174 metric tons or 7.1% in April to 2,275.84 metric tons. The SPDR gold holdings fell to a 43-month low to 1,078.54 tons at the end of April.