Gold Rally Marked by Short Covering

If there was ever any doubt that the majority of buying by the hedge fund category in the gold market over the past 3-4 weeks has been of the nature of short covering, this week’s COT should put that theory to rest.
Since the third week of July, the hedge fund category alone has covered or lifted 40,000 short positions. That against the addition of only 16,000 or so new long positions over the same time span. By a better than 2:1 margin, hedge funds have been covering shorts, not instituting fresh purchases of gold.
In the following chart, I have combined the speculative category ( hedge funds, large reportables and small specs) outright long and short positions and overlaid them upon a chart showing the price of gold. (more)