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Analysts note it didn't take much to drive hedge funds back into gold and push prices above $1,800

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(Kitco News) - Hedge funds once again see value in gold as money managers increase their bullish bets on the yellow metal and cover their bearish positions, according to the latest data from the Commodity Futures Trading Commission.

The threat of rising inflation, coupled with economic uncertainty following disappointing employment numbers is prompting investors to find safe-haven assets again, analysts said. For many, gold's push Monday to its three-month highs above the 200-day moving average means that momentum is just starting to pick up.

"We've noted that the composition of gold flows is changing, highlighting that discretionary capital could once again be flowing into gold, but rising ETF flows alongside money manager positioning have since lent strength to this view — particularly as the "transitory" debate surrounding inflation gathers share of mind," said analysts at TD Securities in a note to clients Friday.

CFTC disaggregated Commitments of Traders report for the week ending May 11 showed money managers increased their speculative gross long positions in Comex gold futures by 13,861 contracts to 131,295. At the same time, short positions fell by 14,129 contracts to 49,680.

Gold's net length currently stands at 81,615, soaring more than 52% from the previous week. During the survey period, gold prices managed to break through $1,800 an ounce and tested resistance just below $1,850.

Gold's net length is at its highest level since mid-February; however, some analysts say that the precious metal is just getting started.

"This is the largest one-week increase since June 2020, but overall positions remain fairly modest," said John Reade, chief market strategist at the World Gold Council, said in a comment on Twitter. "Room to grow."

Carsten Fritsch, precious metals analyst at Commerzbank, also said that he sees higher prices on the horizon.

"The turnaround in sentiment among investors and the momentum suggests that gold will continue its upswing," he said.

Although gold prices are attracting new attention, the silver market continues to fire on all cylinders, even as the market sees some new bearish positioning.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 6,640 contracts to 73,342. At the same time, short positions increased by 2,703 contracts to 26,851.

Silver's net length currently stands at 46,491contracts, up 9% from the previous week. Silver's net length is currently at its highest level since late December.

During the survey period, strong investment demand helped silver prices hold above $27 an ounce and even test resistance at $28 an ounce.

According to many market analysts, helping to push gold prices higher has been the red-hot copper market, which hit all-time highs last week. However, the latest CFTC data shows that some investors appear to be using the current rally in the red metal to take some profits.

The disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures fell by 5,013 contracts to 95,238. At the same time, short positions fell by 105 contracts to 35,031.

Copper's net length currently stands at 60,207 contracts, down 7.5% from the previous week.

During the survey period, copper prices rose to an all-time high of $4.888 per pound. Many commodity analysts expect that a perfect storm of rising demand and falling supply will continue to push prices higher.

In a recent report from Bank of America, commodity analysts said that they could see copper prices pushing above $5 a pound or $13,000 a tonne as the market's supply deficit looks to double next year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.