New York (HedgeCo.net) – With the increasingly volatile global stock market changing rapidly, hedge funds and other institutional investors seem to be moving away from their bearish positions on gold.

If we look at the Commitment of Traders report from Friday, we see that the net position on gold from the large speculator category has jumped from a net long 24,465 contracts at the end of July to a net long position of 70,773 contracts. At first glance it would appear that this was increasing bullish sentiment, but that is not the case.

What we see is that on July 28, the group was long 182,977 contracts and short 158,512 contracts, giving us the net total of long 24,465. As of August 25, the group was long 189,893 and short 119,160 contracts for the net long position of 70,773. While the contracts held long only increased by 6,916, the contracts sold short dropped by 39,352 contracts.

Gold did manage to rally 4.2% from July 28 through August 25, but as we can see it was more short covering than it was increased bullish sentiment.

Rick Pendergraft
Research Analyst
HedgeCoVest