Short positions in the gold market are falling, as money managers are increasing their speculative gross long positions in Comex gold futures, leading to the second-biggest ever short covering rally on record, according to a report by Kitco, citing data from the Commodity Futures Trading Commission (CFTC).

According to the data cited in the report, managers increased their speculative gross long positions in Comex gold futures by 10,774 contracts to 104,708, while short positions fell by 31,096 contracts to 89,605.

The report also noted that the speculative positioning has turned sharply bullish and is net long by 15,103 contracts, with gold prices being propelled through initial resistance at $1,900 an ounce.

The report quoted a commodity analyst as saying, “This situation suggests large overweight, short positions, which may have been trimmed with rising gold prices. This is supported by our Dry Powder Analysis, which shows money manager's short positioning, in notional terms, diverging significantly from the trend line."