This indicator suggests that the price of gold may rise further

The price of gold has already risen considerably in recent weeks, but the price could rise even further in the near future. This is because many mutual funds do not have a position in gold, which means that the rally could continue for some time. Bloomberg Writes that investment funds still hold a relatively small long position in the precious metal, especially compared to previous years. 

This reluctance means that there is still a lot of upside potential in the gold market, especially if the correction that many investment funds are waiting for does not materialize. The chart below shows that mutual funds have a limited long position in the precious metal on the futures market. Compared to previous years, fund managers are now much more cautious. Joni Teves, strategist at Swiss bank UBS, told Bloomberg.

"Despite a more positive attitude, investors have not yet entered gold en masse. The reluctance lingers. The risk of a situation where many market participants are waiting for a dip is that they will have to catch up if the positive factors persist."

Investment funds still have few positions in gold (Source: Bloomberg)

Gold price could rise further

Several banks have become positive about investing in gold in recent months. At the end of last year, Georgette Boele of ABN Amro expectation that the price of gold is likely to rise further this year. Later, Goldmans Sachs and Société Générale with a positive price target for gold in 2019. 

According to Boele, the weakening of the dollar this year will have a positive effect on the gold price. She also cited the short position in gold as a reason to be positive on the precious metal, as it is an indicator of overly negative sentiment. That sentiment now seems to be reversing, with the result that many investors are Gold price further boosting.

France's Société Générale expects the precious metal to benefit from gold purchases by central banks and weaker economic sentiment. The fact that the Federal Reserve has postponed another interest rate hike gives gold investors reason to be positive.

Caution advised

Despite the positive trend in gold, not everyone is optimistic. Morgan Stanley has its buy rating on the precious metal this week Withdrawn. The bank advised investors to buy gold in September, but now expects the price to fall again. David Govett, gold trader at Marex Spectron Group in London, also sees little upside potential. In a statement to Bloomberg, he said:

"You get a reverse snowball effect when the price of gold rises. The higher the price goes, the more money it attracts from funds. But overall, the stock market is solid and I doubt the dollar is going to fall that much further, so I think the upside potential for this move is limited."