Gold market sees second-biggest short covering rally on record as hedge funds caught wrong-footed

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Kitco News' general-interest stories takes a look at what is making headlines in the marketplace and how that is impacting precious metals prices

- Analysts were warning that the gold market was ripe for a short squeeze rally as prices fell to a seven-month low earlier in the month, and they were proven right as the latest trade data from the Commodity Futures Trading Commission showed significant short-covering in gold and silver.

Commodity analysts at Société Générale noted that this was the second-largest short-covering move in the gold market on record, going back to 2006. "Something I've said a few times in the past year or ten. The Comex #gold COTR is a useful tool to judge short-term vulnerabilities in the gold market," said World Gold Council chief market strategist John Reade in a social media post."One thing that has stood out a few times. Net Managed Money, when it gets short, eventually covers. It can take a few weeks, even a few months, but when it does, gold has traded much higher.

Data shows that along with speculative momentum, long-term investors are starting to jump into the market and buying gold-backed exchange-traded products. SPDR Gold Shares , the world's biggest gold ETF, saw its holding increase by 15 tonnes on Friday as prices spent most of the session above $2,000 an ounce.

Along with gold, the silver market is also enjoying a shift in fortunes as bearish investors were caught wrong-footed.

 

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