Gold price jumps to 3 month high

Hedge funds positioning themselves for further upside

With weakness returning to equities and crude oil on Monday, gold futures trading in New York attracted brisk buying from investors eager for alternatives amid all the market turmoil.

In afternoon trade gold for delivery in April, the most active contract, was exchanging hands for $1,129.30 an ounce, up $12 or more than 1% compared to Friday's close and at its its highs for the day.

Thanks to safe haven buying gold’s trading at a 3-month high and is now up 7.5% since hitting a near six-year low mid-December.

Across 24 commodity futures markets money managers entered a net long position for the first time in five weeks

Large futures speculators or "managed money" investors such as hedge funds dramatically raised bearish bets on gold during the final months of 2015. Net short positioning – bets that gold could be bought back at a lower price in the future – hit a record 2.4 million ounces during the final trading week of 2015.

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 released on Friday speculators added to long positions – bets that prices will rise – and trimmed short positions, leading to a more than 10-fold increase in net longs.

Speculators also added 55% to net silver long positions while copper bulls came roaring back trimming overall short position by a third. Platinum longs were increased and shorts cut, but bullish palladium bets declined from the previous week. Both PGMs remain in small net long positions.

Across 24 commodity futures markets money managers reduced bearish bets, entering a net long position for the first time in five weeks according to data by Saxo Bank.

Better sentiment towards crude oil was the most notable feature of as bullish bets increased by 34% – the biggest percentage jump since 2010. Traders may be regretting the shift with US benchmark crude oil prices plummeting 6.2% to $31.50 a barrel on Monday.

At the start of the year, across all commodity futures net short positions increased to 112,000 lots, the highest since government records began in 2009.