Money managers and investors have increased bullish gold positions in the second week of 2016, with speculators moving to a net long position on COMEX for the first time in nine weeks, data from the US Commodity Futures Trading Commission showed Monday.
Net long positions in gold held by managed-money investors increased to 92 contracts in the week to January 12, reversing a net short position of 15,927 a week earlier, data showed.
"In other words, almost record-high net short positions were completely eradicated in the space of just two weeks," Commerzbank said Monday.
Net short positions had been over 27,000 in the last week of December, a record high according to the CFTC data.
But a strong start to gold in 2016 on the back of falling stock markets, originating from market turmoil in China and geopolitical tensions, has seen prices gain as much as $50/oz year to date, with investor appetite clearly increasing as a result.
Holdings in exchange-traded products have also increased, with the world's largest, SPDR Gold Trust, showing additions of 6.24 mt in the week ending January 15, taking total additions for the year to date to over 15 mt.
"Clearly there are growing doubts among market participants that the US Federal Reserve will implement a further rate hike in March," Commerzbank said.
If interest rates are not raised in the short term, the opportunity costs of holding gold will be lower for longer.
Barclays said in a note Monday it expected the pace of US Federal Reserve interest rate rises to resume its role as the main driver of gold prices.
The probability of rates remaining unchanged at 0.50% at the next FOMC meeting at the end of January was over 90%, according to the CME 30-day Fed Fund Futures.
The chance of a rate hike at the following meeting in March was 30% and by June 49%, according to the CME.
The London Bullion Market Association Gold Price settled at $1,090.45/oz Monday morning, down $3.30/oz on Friday's close.
Meanwhile, net long positions in silver were up 8.3% at 8,549 contracts, according to CFTC data, whilst platinum and palladium were both down, platinum 11.4% lower at 9,223 net long positions and palladium down 24% at 6,016 contracts.
