Gold futures saw their shiniest week since 2011 upon comments from Fed Chairman Ben Bernanke tempering fears the central bank would imminently slow its bond purchasing program.
Hedge funds and other speculators increased their net-long positions by 4.1 percent to 35,691 futures and options, Bloomberg reports.
On June 19, Bernanke sent markets into a tizzy — and gold plunging — when he hinted the central bank may begin to taper quantitative easing if the economy improves.
But gold rallied on the chairman’s dovish comments during a question and answer session last week, with futures gaining 5.4 percent on Comex. Traders are the most bullish in five weeks, according to a Bloomberg survey.
So is gold headed for a bull market?
The prospect of higher interest rates and a stronger dollar mean the recent gains may be short-lived, said John Goldsmith, the deputy head of equities with Montrusco Bolton Investments in Toronto.
“Gold may have gotten oversold and was due for a bounce, but a bounce doesn’t a bull market make,” said Goldsmith, whose company manages C$5.50 billion ($5.28 billion) of assets. “There’s upward pressure on rates and on the dollar.”
The gold rally reversed much of its losses since that July 19th Fed press conference, but the shiny yellow metal is still down 24 percent this year.