Hedge funds aren't buying into gold price rally
Gold jumped to a five-week high on Monday as bullion bulls made the most of sputtering stock markets and a weaker US dollar.
Gold for delivery in February, the most active contract on the Comex market in New York, hit a high of $1,186.40 an ounce in early afternoon trade, up over 1% from Friday's close and the highest on an intra-day level since December 5.
Gold is up $60 an ounce since hitting post-US election lows of $1,124 mid-December, but remains down just over $150 from an initial but brief surge on election night as results showed a likely victory for Trump in the presidential race.
According to a survey by Bloomberg released on Friday, gold traders are the most bullish in over a year predicting strong gains in 2017 following a 8.7% rise of the course of 2016:
Despite gold's brightening prospects, hedge funds or so-called managed money investors in gold futures and options continue to add to bearish bets on the metal.
In July last year when gold was hitting its 2016 peak, hedge funds had built up long positions – bets on a rising price – to 28.7 million ounces, an all-time high.
Large scale speculators began to cut back on bullish bets as far back as September and the latest weekly data from the CFTC show net longs down to fewer than 3.6 million ounces, 88% below the July record.
It's the most bearish net positioning since January 2016 and has been accompanied by a significant increase in gross shorts – bets that gold could be bought back cheaper in future – which have more than doubled since the Trump victory to a one-year high: