Hedge funds caught on the wrong foot as gold, silver short squeezes fizzle

(Kitco News) - Volatility surrounding the Federal Reserve’s monetary policy continues to dominate the precious metals market as hedge funds were caught on the wrong foot and were unable to squeeze gold and silver prices through critical resistance levels.

The gold market rallied to a three-week high last week as the latest trade data from the Commodity Futures Trading Commission shows a solid increase in long positioning and a sharp reduction in bearish bets.

Some analysts noted that disappointing economic data and signs that the labor market is starting to cool attracted some buyers, all while gold was starting to see oversold price levels and conditions for a short squeeze were building.

The CFTC's disaggregated Commitments of Traders report for the week ending Aug. 29 showed money managers increased their speculative gross long positions in Comex gold futures by 15,524 contracts to 120,609. At the same time, short positions fell by 14,609 contracts to 81,367.