Net short positions in gold held by managed-money investors totalled 17,422 contracts in the week to December 8, down from record highs the previous week, trade data released by the US Commodity Futures Trading Commission showed Monday.
Net short positions were down from 20,566 gold contracts the previous week, the highest level since records started in 2009, data showed.
Net long positions in silver were down 19% at 9,271 contracts, the lowest level for 15 weeks.
Long positions in platinum and palladium were both marginally higher, at 5,819 and 8,807 contracts, respectively.
Holdings in exchange-traded products backed by gold also showed declines.
The world's largest gold ETP, SPDR Gold Shares, saw holdings fall 4.17 mt on the week as of December 11 to 634.63 mt, the lowest level since 2008, company data showed.
The data shows most market participants are short gold ahead of the US Federal Reserve rate hike widely expected on Wednesday.
In a note Monday, Commerzbank said a rate hike is now fully priced in and market participants are likely to be "more interested in hearing the Fed's plans for its future monetary policy."
"If the first rate hike happens on Wednesday, one major uncertainty will fall away that has been weighing on the gold price in recent weeks," it said.
Barclays said Monday that with large shorts going into the Fed meeting and high expectation of a hike, "any disappointment could trigger aggressive short covering."
The London Bullion Market Association Gold Price settled at $1,068/oz Monday morning, down $4.50/oz on Friday afternoon.
