Speculators boosted bullish gold bets to a three-month high on signs central banks will act to counter low inflation, reviving the allure of bullion as a hedge.
The net-long position in New York futures and options climbed for a third week, the longest expansion since July, government data show. Short holdings fell to a 14-week low.
Futures rebounded 5.7 percent since touching a four-year low on Nov. 7. European Central Bank President Mario Draghi said last week that policy makers “won’t tolerate” a prolonged period of low inflation, as officials consider increasing asset purchases. China lowered interest rates to spur economic growth, while Japan has expanded its unprecedented stimulus program.
“Prices have to trade back higher because of the sheer size of the monetization of this debt,” Frank Holmes, the chief investment officer at U.S. Global Investors in San Antonio, which oversees about $1.2 billion, said by phone Dec. 5. “How do you unwind that? Gold should be looked at as an insurance.”
The net-long position rose by 20 percent to 79,497 futures and options in the week ended Dec. 2, the highest since Aug. 26, according to U.S. Commodity Futures Trading Commission data. Holdings more than doubled in three weeks.