Hedge funds and money managers are now less bullish on gold than they've been since June 2007, data from the Commodity Futures Trading Commission show. And that could actually be good news for the beaten-down metal.
"This could set us up for a bit of a run to the upside if we have the catalyst," said Rich Ilczysyzn of iiTrader. "But if we don't get it, then gold could go dormant for a while."
In the week ended Dec. 3, short bets on gold increased by 4,557 to 79,631 lots, and longs slipped slightly to 106,405. That means the net long position in gold fell 16 percent to 26,774 futures and options, which is the smallest net-long position since June 2007.
The interesting corollary to this fact is that from June 2007 to March 2008, gold prices rose by 50 percent.
"I believe that the market's probably too bearish now," said Jim Iuorio of TJM Institutional Services. "And despite the fact that the fundamentals are weighing on gold, market positioning may predict a countertrend rally."
As economic data have improved, many now expect the Federal Reserve to start to bring its quantitative easing program to an end. This is likely to cause interest rates to rise, making non-interest-bearing assets like gold less attractive. Meanwhile, QE has failed to stoke the rampant inflation that many have predicted. Between rising rates and little inflation, investors have largely lost their reasons for owning gold.
(Read more: Here's what was behind gold's wacky jobs reaction)
On the other hand, gold sentiment may have gotten so depressed, and gold positioning so bearish, that the upside now outweighs the downside.
"We've got some large customers that are actually starting to look at this and saying 'I'll buy it here, and put a stop below the yearly low,'" Ilczyszyn said. "The thought now is, 'We might as well just put some on down here.'"
This trade makes sense to Mark Dow, a former hedge fund manager who writes at the Behavioral Macro blog.
"The smart risk-reward trade is to take a stab at gold," he told CNBC.com. "If this is a retest of the low, this is what a retest would look like, which sets up a very favorably asymmetric trade for being long gold or gold miners."
(Read more: Gold in 'flux' until taper timeline gets clearer)
But while Dow sniffs a trading opportunity, his long-held bearish view on gold has not changed. In the longer term, he believes that a rise in rates will "bring about the second leg down in the gold bubble."
"I do think we get a rally in gold, but I hate gold," Dow said. "It's the brainless metal. Owning it drops your IQ by 10 points."
—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.
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