Hedge funds up bullish gold price bets most since Trump win

Gold made headway for the sixth day in a row in heavy trade on Monday as the metal continues to make up lost ground following Donald Trump's victory, the dollar weakens and interest rates in the US trend lower again.

Gold for delivery in April, the most active contract on the Comex market in New York with nearly 16m ounces traded by lunchtime, hit a high of $1,264.90, bringing its year-to-date gains to nearly 10%. Gold is now at it's the highest since November 11, erasing much of its losses since the US presidential election.

Because gold is not yield-producing and investors have to rely on price appreciation for returns, the metal has a strong inverse correlation to US government bond yields. The metal also usually moves in the opposite direction of the US dollar.

Gold bears had been making big bets that Trump's plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates and a more robust dollar.

A number of prominent hedge fund managers and billionaires running family offices moved aggressively out of gold and into stocks.

That pattern seems to be reversing with hedge funds or so-called managed money investors in gold futures and options add to their exposure to the yellow metal by a fifth  last week according to trader positioning data supplied by the government.

Overall bullish positioning or net longs held by derivatives traders jumped to 8.2 million ounces, it was the biggest increase in bullish bets since the start of November. That's still well below July's all-time record of nearly 29 million ounces when gold was hitting its 2016 peak, but does mark a change in sentiment.

Gold helped to drag May silver contracts higher which were priced at $18.54 in New York, up close to 1% from Thursday's close. Silver has enjoyed nine straight week of gains for, the metal's best weekly run of gains in more than a decade. Year to date silver is up 14.7% and compared to lows hit January 2016, the metal has recovered 35% of its value.

Large scale speculators in silver have been  bullish on the price for a long time with CFTC data indicating that traders added to long positions and cut shorts – bets that silver can be bought back cheaper in future – for eight weeks in a row . Net bullish positioning has now reached the equivalent of close to 377 million ounces, a 21-week high.