According to trading data from the Commodity Futures Trading Commission (CFTC), hedge funds are increasingly focusing on gold and silver, with speculative positions reaching a significant milestone last week.

Although bullish bets on gold did not increase significantly, net bullish positions exceeded 200,000 contracts for the first time in four years.

This milestone was achieved as gold prices continued to approach the historical high of over $2,500 per ounce.

Conversely, the increase in bullish positions was due to short covering as hedge funds exited short positions.

The CFTC's Commitments of Traders report for the week ending August 27 showed that fund managers reduced speculative total long positions in New York Mercantile Exchange gold futures by 4,166 contracts to 217,976.

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Meanwhile, short positions decreased by 11,152 contracts to 17,685.

The net position in gold currently stands at 200,291 contracts.

During the survey period, gold prices managed to consolidate above $2,550 per ounce.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, "Gold has been very quiet this week, with near record price levels not attracting funds holding high net long positions to take profits."

Due to the high positions in gold, analysts pointed out that there are short-term risks in the market, although momentum indicators have not yet been overbought.

The gold market is less than 38,000 contracts away from its 2019 historical high.

Commodity analysts at TD Securities said in a report on Monday, "Other perspectives on this positioning suggest that Western fund managers can continue to increase their long positions."

"A direct analysis of CFTC position data indicates that speculators' positions are only slightly frothy, far from historical highs.

However, our advanced position analysis suggests that the market has reached its maximum value considering leverage rates."

Analysts warned that there is a risk of gold prices falling back to $2,400 per ounce in the near term.

However, despite the increased risks, other analysts remain relatively optimistic.

Matt Simpson, a market analyst at City Index, noted that the net long exposure is very close to a record high after adjusting for the total value of open contracts.

He said, "However, this is because the total open contracts are relatively low by historical standards, indicating that many investors are still on the sidelines and skeptical about a gold rally."

"Overall, this is bullish."

Like gold, silver has also attracted bullish interest from hedge funds.

The disaggregated report showed that the total speculative long position of money managers in New York Mercantile Exchange silver futures increased by 3,399 contracts to 42,916.

Meanwhile, short positions only increased by 51 contracts to 9,729.

During the survey period, silver prices broke through $30 per ounce.

However, the market has been unable to maintain these gains as prices have been testing support near $28 per ounce.

Although many investors are very optimistic about silver due to industrial demand exceeding supply, some analysts warn that an economic slowdown could put pressure on industrial demand for silver, which could potentially put pressure on prices.