Hedge funds add to their bullish bets on gold ahead of pivotal FOMC decision

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The gold market is now net long by 79,879 contracts, holding at last week's nine-month high. During the survey period, gold prices tested resistance just below $1,950 an ounce. Shiels noted that hedge funds are gross long 16 million ounces of gold, still down from last year's peak of 21 million ounces. She added that while gold has some room to move higher, it could be sensitive to the Federal Reserve's monetary decision Wednesday.

A growing chorus of analysts has said there is a risk that the Federal Reserve comes out more hawkish than markets expect, which would boost the U.S. dollar and weigh on gold prices. "Gold buying activity continued this week, despite largely muted price action with Shanghai traders on holidays. Money managers added to their longs and covered shorts, which more than offset the growth in other reportables' shorts," the analysts said."We will continue to monitor our gauge of Shanghai gold positioning closely to gauge whether Chinese buying appetite will dry up post Lunar New Year celebrations.

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