Hedge Funds Plowed Aggressively Into Gold Last Week

One of the big stories in markets in 2013 so far has been the epic crash in the gold market.

Gold reached its highest price of the year on January 17 – at $1686 an ounce – before falling 28.8% to a low of $1200 an ounce on June 27 (since then, it's bounced back a bit, and is now trading around $1320).

One of the obvious side effects of such a crash in the gold price was the serious trimming of positions among hedge funds (a.k.a. "large speculators"), as evidenced by the Commodity Futures Trading Commission's weekly Commitment of Traders report.

After reducing bets on the shiny yellow metal to the lowest levels since 2005 in recent weeks and months, hedge funds plowed aggressively into gold last week.

"Large speculators increased gold longs by ~74% to $6.6bn from $3.8bn notional," write BofA Merrill Lynch analysts MacNeil Curry, Jue Xiong, and Stephen Suttmeier in a note. "Positioning bounced back from the lowest levels since 2005 but remains in the contrarian buy zone. Despite the recent pullback from 1347, evidence says stay bullish for 1407, potentially 1450 before renewed basing."