Money Managers' Net Bullish Positioning In Gold Futures Disappears
(Kitco News) - Money managers have reversed to a tiny net-short position in gold futures, the first time they have not been net bullish in more than two years, according to the most recent weekly data from the Commodity Futures Trading Commission.
During the week-long period to June 26 that was covered by the report, Comex August gold fell by $18.70 to $1,259.90 an ounce, while July silver lost 7.3 cents to $16.25.
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.
The CFTC’s “disaggregated” report showed that money managers had a small net-short position of 24 contracts after a net long of 10,528 the week before. Analysts at Commerzbank noted that this was the first time the market was net short in gold in two and one-half years.
“Short positions, in particular, were built up, which means speculative financial investors are currently betting heavily on falling prices,” Commerzbank added.
Analysts were referring to an 11,100 rise in gross short positions, which more than offset a more modest 548-lot increase in gross longs.
This occurred as the technical outlook for gold deteriorated below $1,285 an ounce, said Ole Hansen, head of commodity strategy with Saxo Bank.
“Following central-bank divergence which precipitated USD [U.S. dollar] strength, particularly against emerging-market currencies, even consolidating interest rates and growing trade angst were unsuccessful in sparking interest in gold,” said TD Securities. “In fact, money managers continued to reduce their net length, adding shorts in response to downward momentum and technical indicators, while longs stayed on the sidelines as investor interest fades.
“But we suspect it is too early to write gold's obituary as the USD is set to resume its downward trajectory while the yield curve continues to near inversion.”
Meanwhile, in silver futures, the net-long position of managed-money accounts declined to 22,061 futures contracts from 27,736 the prior week. This was mainly due to fresh selling as the number of short positions rose by 4,790, although there was also some long liquidation, as reflected by a decline of 885 gross longs.