The precious metal fell steadily last week and by Monday, gold was seen testing the psychological support level at $1200. The same level was last tested in early February this year. Gold extended its declines as Fed officials raised a hawkish outlook on Fed rate hikes, with investors expecting to see liftoff for the second time in either June or July. Last Friday, Janet Yellen at an award ceremony at Harvard University sounded optimistic, stating that rate hikes were appropriate over the following months with most of the other FOMC voting members echoing similar views.
Gold prices - which initially rose to test the $1300 handle pulled back sharply and extended the decline for nearly 4 consecutive weeks. Last week's CFTC Commitment of Traders report showed that while speculators cut their long positions in gold by nearly 45,218 contracts, short positions increased by 12,942 contracts. Interestingly, the commercials group in the CoT report, which is made up of actual commercial users of gold, increased their long positions by 37,956 contracts - apparently one of the largest increase since 2006. The commercials group is made up actual users including gold merchants and bullion banks, and the shift to net long positions usually comes weeks ahead of a rally in prices.
Gold Finds Support at $1,200
Market Trends - 31/05/2016