The latest week saw the largest jump in gold speculative net long futures positions in over four years as bargain hunters stepped in.
Although Fed Chairman Bernake’s testimony to the Congressional Joint Economic Committee last week was non-committal on the potential for QE3, bargain hunters appeared to take price weakness as an opportunity to accumulate net long gold futures positions at the fastest pace since December 2008, surging 28%.
Despite the sharp rise, net longs still remain near end 2008 lows. The announcement over the weekend that the Eurozone has agreed to lend Spain €100bn to rescue its collapsing banking system caused most risk assets to rally Monday morning, with gold also benefiting.
This week investor focus will likely be on the follow-through on the announcement, with key details and the mechanics of the package still to be revealed.
Italy’s debt auctions this week will also be a key focus, to see if contagion has been halted by Spain’s package. On the data front, European industrial production and unemployment will be looked at closely as investors assess the strength of the European economy.
U.S. industrial production and CPI will also be monitored as a weakening US economy and weak inflation would increase the likelihood of the Fed moving towards QE3. Major upcoming signposts to monitor are the Greek elections on June 17th, the G20 summit on June 18/19 and the FOMC meeting statement on June 20th.