Gold Gains Bullish Momentum as Speculators Bet on $4,000 Price

Speculative investors have increased their bullish bets on gold for the third consecutive week, according to Bank of America's survey. The rise in optimism is partly due to growing concerns about the sustainability of US government debt, reigniting the debasement trade.

The CFTC's Commitments of Traders report shows that money managers have increased their speculative gross long positions in Comex gold futures by 5,961 contracts to 154,595. At the same time, short positions increased by 1,975 contracts to 12,947. Gold's net length now stands at 141,648 contracts, its highest level since late September.

According to Bank of America's August Global Fund Manager Survey, gold still has the potential to move higher as sentiment has been fairly lackluster. The survey found that 16% of fund managers said gold was undervalued, compared to 6% in July. Candace Browning Platt, Head of Global Research at BofA, noted that current investor buying is consistent with a gold price of $4,000 and purchases must accelerate before the price can reach $5,000.

Although the gold market has seen a significant recovery from July's lows, some analysts note that the market still faces headwinds, such as rising oil prices driving inflation fears and potentially forcing the Federal Reserve to raise interest rates before the end of the year. Bart Melek, Head of Commodity Strategy at TD Securities, said 'USD debasement fears should see gold be well-supported in the coming weeks.'