Net long gold positions on US commodity exchange COMEX jumped 16% to 269,535 contracts in the week to September 6, Commodity Futures Trading Commission data showed Monday.
Up from an 11-week low around 230,000 net long contracts the previous week, the current figure was the highest net long position since the beginning of July.
Gold prices were little changed in early trade Monday, priced around $1,330/oz, but down from last week's highs of $1,355/oz as the chances of an early US interest rate rise failed to subside.
Despite a raft of weaker than expected economic data, comments from US Federal Reserve officials have kept the possibility of a rate rise in September alive for some investors, with CME Fed Fund Futures showing a possibility of a rise at this month's meeting above 25%, up from 15% last week.
The likelihood of a hike in November are around 27%, with December now back above 60% having dropped below 50% last week for the first time in recent weeks.
Last Thursday, the European Central Bank kept monetary policy unchanged, but dashed hopes it would extend its quantitative easing programme, while comments Friday from the president of the Boston Fed added to a growing number dissenting committee members expected at the September 21 meeting.
"Markets have been 'climbing a wall of worry' having just recovered from Brexit and appear vulnerable to news of higher interest rates at a time when funds are desperately searching for low-risk yield," SP Angel said Monday.
Commerzbank analysts said the large net long speculative position could offer risk to the downside via profit-taking.
"The unfavourable price dynamism, the high speculative overhang beforehand and the proximity to the psychologically important $1,300 per troy ounce mark are likely to weigh further on the gold prices in the short term," they said in a note Monday.
At the same time, investor demand for gold-backed ETFs remained weak.
SPDR Gold Trust, the world's largest gold-backed ETF, reported inflows of just 2 mt in the week to Friday, following outflows of around 15 mt in August.
Meanwhile, net long silver positions climbed for the first time in six weeks, up 10% to a four-week high of 79,887 contracts, CFTC data showed.
Silver prices were down around $18.80/oz Monday, from close to $20/oz last week, dragged down by gold prices.
Platinum positions declined for the fourth week, down 10% to an eight-week low of 29,813 net long contracts. Palladium was 2% lower to 4,558 contracts in the week to September 6, also an eight-week low.
