Gold regained some of its luster Monday with June Comex gold ending up $30.50 at $1,425.80, and spot gold prices finishing up $19.80 at $1,426.75.
The gains came from short covering, bargain hunting, and strong demand for physical gold.
According to the Commodity Futures Trading Commission's Commitments of Traders report released April 19, managed money traders (i.e. hedge funds and commodity trading advisors) boosted bullish positions on gold by 21,675 contacts to 68,662 contracts, while paring bearish bets to 54,025.
The CFTC's summary of trading positions showed bullish investors returned to the gold market last Tuesday, when the data was compiled. The increased long positions came on the heels of gold's largest one-day sell off in 30 years.
The report showed managed money traders covered 12,411 shorts, as gold prices finally bounced last Tuesday.
Meanwhile, renowned hedge fund manager John Paulson of the Paulson Advantage Fund continues to stand pat with his gold position. This comes as he has lost an estimated $1.5 billion this year on gold (he maintains a 21.75% stake in the SDPR Gold Trust ETF (NYSE: GLD).)
"The decline in gold prices has not changed our long-term thesis," John Reade, a partner and gold strategist at Paulson & Co., told Bloomberg News last week. "We started investing in gold at $900 in April 2009 and while it's down from its peak to $1,500, it's up considerably from our cost."
Gold was around $905 when the fund began accumulating the precious metal some four years ago.
Reade added that gold will continue to appreciate over the long haul because global governments continue to keep the monetary printing presses going at full speed.
"Federal governments have been printing money at an unprecedented rate," Reade said. "We expect the strengthening of the economy and stock market to cause money supply to rise more than real growth and eventually lead to inflation. It is this expectation of paper currency debasement which makes gold an attractive long-term investment for us."Why Gold Prices Will Rise
While Wall Street's big players are betting on gold, the crowd on Main Street is also in on the action.
Pent-up demand from retail buyers has juiced gold prices. Coin dealers, jewelers and sovereign mints around the world report robust sales. This healthy demand continues to propel gold prices higher from last week's lows, and has provided a cushion for the yellow metal.
ETF Securities said this could be the stabilization point for gold prices, as the bullish long-term outlook comes back to drive the price higher.
"The rise in developed economy debt continues unabated. Interest rates will need to remain structurally low to offset fiscal drag, keep interest rate payments from ballooning and to support growth," ETF Securities explained to Kitco.
"Until the countries backing the world's major reserve currencies put in place credible polices to control their growing debt burdens, the public will look to gold as one of the few hard currency hedges against the risk these countries continue to try to reduce their real debt burdens through the debasement of the purchasing power of their currencies. Gold will remain in a bull market until these debt issues are resolved or a credible and liquid alternative to the current fiat currencies emerges," the statement continued.
Gold's move above $1,400 today, cracking a level not seen in five trading sessions, followed a brutal week that left the yellow metal down 7%, or $105.70, to $1,395.40.
Gold prices fell 4% on Friday, April 12, and tumbled an additional 9% Monday, April 15, marking the steepest two-day selloff since gold trading on the Comex exchange began in 1974.
The SPDR Gold Trust ETF (NYSE: GLD) was up more than 1.7% Monday.
For a recent forecast on gold prices, check out this report by Money Morning Chief Investment Strategist Keith Fitz-Gerald.
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- CNN Money:
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- Bloomberg News:
Paulson Losses More Than $300 Million as Gold Declines