Fund Managers Trim Bullish Gold Positioning During Price Retreat
(Kitco News) - Money managers finally trimmed their bullish positioning in gold futures during the latest reporting week for data gathered by the Commodity Futures Trading Commission, after they had been net buyers for more than two months.
The statistics “show that speculative financial investors reduced their net-long positions in gold for the first time in 10 weeks during the week to 19 September, no doubt contributing significantly to the price slide in the reporting period,” said a research note from Commerzbank.
Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.
Money managers cut their net-long position in the disaggregated report to 233,382 futures contracts as of Sept. 19, down from 253,517 the prior week. Most of the decline was selling to exit bullish trades, which is typically due to profit-taking or to limit losses, as the number of total long positions fell by 18,678. Gross shorts rose by 1,457, reflecting some fresh selling as well.
“Gold specs aggressively reduced their net-long exposure this week, after the changing macro and monetary policy dynamics prompted money managers to start liquidating their elevated long exposure,” said TD Securities. “Investors were convinced to take profits and reduce exposure to the shiny metal at prices above $1,300/oz, after North Korea tensions eased, CPI [consumer-price-index] data showed an improvement in U.S. inflation and the Fed observers decided that they would continue to be committed to hiking rates this year, which saw the probability of a December rate hike move above 60%.”
Still, the CFTC data show bullish positioning in gold remains “extended” despite the long liquidation, said Mitsubishi. In fact, TDS suggested gold could ease some more – perhaps back to the $1,275 to $1,285 area, as higher rates and a steep yield curve weigh on the precious-metals complex.
Nevertheless, Mitsubishi also lists supportive influences.
“Further reductions in long exposure are likely to have taken place since [the cutoff date for the last CFTC report], but we anticipate that many investors view gold as a haven amid ongoing political and economic risks and the need to hedge excessive equity market length,” Mitsubishi said.
In the case of silver, money managers cut their net-long position to 67,711 lots from 76,066 the week before, the data show. MKS (Switzerland) S.A. pointed out that the largest factor behind this was fresh short, or bearish, trades. Gross shorts rose by 4,607 lots, although long liquidation also played a role, as total longs fell by 3,748.