Hedge funds aren’t wavering on gold price rally

Equities, yields, oil, the dollar and gold were all in pull-back mode on Monday as the metal failed to capitalize on renewed worries about US and global economic growth.

Traders in gold futures in New York pushed gold for delivery in June, the most active contract, to a week low of $1,215.70 an ounce in early afternoon dealings.

The weakness on gold markets since the 13-month high above $1,260 an ounce reached mid-March hasn’t shaken the conviction of deep-pocketed speculators that the metal is set to add to its $155 an ounce gain so far this year.

Large futures speculators or “managed money” investors such as hedge funds dramatically raised bearish bets on gold during the final months of 2015 pushing the overall market into an unprecedented net short position – bets that gold could be bought back at a lower price in the future.

This year however hedge funds have been non-stop buyers pushing overall positioning firmly back in the black. According to the CFTC’s weekly Commitment of Traders data up to 29 March released on Friday speculators once again added to net long positions – bets that prices will rise – to reach to 16.5 million ounces or 468 tonnes.

That’s a  swing of 530 tonnes since December’s record net short and the highest since January last year when gold briefly traded north of $1,300.

Speculators added to short positions last week, but gross longs  hit of 19.3 million ounces, the highest level since August 2012, which could make gold vulnerable to further profit-taking as traders try to balance positions.

Source: Saxo Bank