FxWirePro: A glance through bullion futures and ETP holdings over FOMC statements and commentaries

Futures: On the Comex division of the NYMEX, gold futures for August delivery were little changed at $1,259.28, off the previous session’s six-week high of 1,265.00.

While the language tweak in the Fed's statement hasn't fundamentally changed anything, it has perhaps reinstalled a level of doubt into market players’ minds. Whereas for the last few months it seems the Fed was set to forge ahead with rate normalization.

Fed signals possible September balance sheet run-off, but doubts over another rate hike increased this year after the FOCM statement downgraded inflation. The changed outlook in central bank behavior towards more hawkish commentary to trigger a sharp reduction in managed money involvement in gold. Since a recent peak in early June, the net long has been cut by 86% to currently stand at 72.2t, as of 11 July.

The reduction has been driven by a sharp increase in gross shorts which have jumped by 58% to an 18-month high. Gross longs fell by 46% over the same period. The net long has edged up in the past week, on fresh buying and short covering.

ETP holdings: In spite of the recent price weakness which has seen some liquidation of ETP holdings, overall holdings remain close to recent highs of around 2,500t.

The fact that ETP holdings are relatively little change allows us to conclude that longer-term investors continue to be attracted to gold as a means of diversification and to hedge against rising uncertainty across other asset classes.