Hedge funds raise bearish gold price bets by 44%

Large scale speculators in gold futures added massively to short positions – bets that prices will fall – ahead of Greek bailout deal.

On Monday the gold price fell sharply at the open as markets continued to digest the implications of the Greek debt deal reached on Friday, but soon recovered to hover around $1,200 for most of the day.

In thin volumes on the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – ended the day at $1,201.30 an ounce, down $3.60 or 0.3% from Friday's close after earlier slumping to near its lowest for the year at $1,190.85.

Silver futures managed to eke out small gains on Monday with March contracts recovering from a day low of $16.12 an ounce to exchange hands at $16.34 an ounce, in late afternoon trade.

Gold is now trading more than $100 below its 2015 high hit January 22 and silver has followed a similar trading pattern – the metal went off to the races at the start of the year to hit a 2015 high of $18.36 on January 22, but has since given up the bulk of those gains.

The precious metals' break in upward momentum is evident in the futures positioning of large investors like hedge funds or so-called "managed money".

Net long positions of gold – bets that the price will go up – held by hedge funds surged in January to 167,693 lots or 16.7 million ounces to hit the highest level since 2012 when gold was trading north of $1,700 an ounce.

But in the week to February 17 according to the Commodity Futures Trading Commission's weekly Commitment of Traders data bullish positioning was trimmed for the third week in a row.

Hedge funds increased short positions on gold – bets that prices will fall – by just under 44% and cut long positions at the same time, reducing the net long position by 18% to 10.3 million ounces.

Silver positioning also turned bearish last week adding 40% to short positions and slightly scaling back longs for a net bullish position of 157 million ounces.

Like the price of silver, speculation in silver futures tend to be volatile. Hedge funds had to cover a net short position of 53 million ounces in October last year after pushing longs to a record of 234 million ounces only three months earlier.

Friday's bailout extension deal ensures Athens avoids bankruptcy, but details of the reforms and austerity measures the European nation has to implement have not been set out.

The agreement simply kicks the can down the road and sets up another potential stand-off in June when a $4bn debt payment comes due.