“There is a disconnect between sentiment and market positioning – sentiment is even more bearish than today’s move suggests,” Tully added.

Gold speculators have cut their bullish positions on gold for the second consecutive week to 90,358 contracts as of May 20. Physical bullion holdings in gold-related ETFs have also dropped to their lowest since 2009. Year-to-date,  GLD held around a high of around 821.5 tons of gold at the end of March, but the ETF is now backed by 776.9 tons of gold, according to State Street Global Advisors data.

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Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own shares of GLD.

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