On Monday gold continued to trade sideways with December futures trading on the Comex market in New York exchanging hands at $1,265.90 an ounce in European trade, down $1.80 from Friday’s close.
Gold has been on the defensive since the start of October and is still down nearly $50 after falling to a four month low of $1,243 on October 7.
Year to date the metal is still managing gains of nearly 20% or more than $200 an ounce, one of its best annual performances since 1980.
But there are signs that hedge funds active on the derivatives market have lost confidence in gold’s ability to claw back losses suffered since mid-July when the metal touched a two-year high near $1,380 an ounce.
Bullish bets placed by hedge or so-called managed money on gold futures and options are down by just over 50% from the July high and below the net position reached in May, when gold came close to falling through the $1,200 an ounce level.
According to the CFTC’s weekly Commitment of Traders data up to October 18 released on Friday speculators added to short positions – bets that gold could be bought back at a lower price in the future – and cut longs pushing bullish bets down to a net 13.7 million, the lowest since the beginning of March.
During the previous two weeks speculators dumped more than 10 million ounces long gold, the most rapid reduction since 2006, when government first started to collect the data.
It’s been a volatile year for futures traders.
Hedge funds dramatically raised bearish bets on gold during the final months of 2015 pushing the overall market into a net short position for the first time on record.
The trend was thoroughly reverse this year however with investors building large bullish positions culminating in an all-time record number of net long contracts in the first week of July of 28.7 million ounces.
That was more than managed money investors’ holding on the gold derivatives market in New York of August 2011 when gold was peaking at an all-time high of $1,900.