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Money Managers' Bullish Positioning In Silver Soars; Gold Length Also Climbs

Kitco News

(Kitco News) - Large speculators hiked their bullish positioning in silver futures by nearly nine-fold and also upped their net long in gold by a more modest 9% during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

During the week-long period to June 12 that was covered by the report, Comex August gold slipped by $2.80 to $1,299.40 an ounce, while July silver rose 43.8 cents to $16.891.

The next CFTC report could show a scale-back in the hedge funds’ bullish posture, however, as gold and silver futures tumbled Friday. The August futures were at $1,282.90 an ounce and July silver was at $16.59 in early New York trading on Monday, meaning they now are down from where they were as of the last Tuesday cutoff for the CFTC data.

“Silver was hit significantly harder than gold on Friday, losing 3.5% by close of trading,” said analysts at Commerzbank in a research note. “As such, it has shed almost all of the gains it had accrued since the start of the month. Because the price rise beforehand had been driven to a large extent by speculation – speculative net-long positions were increased nine-fold to just shy of 41,000 contracts in the space of a week – there was considerable downside potential here.”

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.

Not so many weeks ago, money managers were net short in silver, before moving into a modest net long in the last couple of weeks. The CFTC’s “disaggregated” report showed that money managers then upped hiked their net-long position in silver futures to 40,744 lots in the week to June 12 from 4,619 the week before. This was the result of a combination of fresh buying (total longs rose by 20,103 lots) and short covering (total shorts fell by 16,022).

“Silver specs aggressively increased their length heading into the FOMC meeting [last] week,” said TD Securities. “Despite the highly expected rate hike, along with stronger jobs and wage data [recently], anticipation that the Fed would imply a dovish tone at the meeting prompted shorts to aggressively cover. As prices broke through major resistance levels, contrarian money managers, who were perhaps watching the ugly duckling of the precious complex from afar, gained conviction and added to their longs as the dollar weakened.

“However, late-week fears of a full blown trade wars [are] likely to decrease much of the recently added length as industrial metals came under pressure.”

Meanwhile, in gold futures, the net-long position of money managers rose to 55,504 contracts from 50,880 the week before. This was mostly due to fresh buying as the number of total bullish positions rose by 4,286, although there was also a trace of short covering as gross shorts fell by 338.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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