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CFTC Data Show Spec Gold Net Long Cut After Crimean Vote, FOMC Meeting

By Allen Sykora of Kitco News
Monday March 31, 2014 10:32 AM

(Kitco News) - Large speculators scaled back on their bullish positions in gold and added some bearish ones after Ukrainian tensions eased and comments from the Federal Reserve were construed as hawkish, analysts said.

The most recent data compiled by the Commodity Futures Trading Commission shows that large speculators cut their gold net-long position in the “legacy” report by 15% during the reporting week to March 25. They cut their net long in the “disaggregated” report by 13%.

Comex June gold tumbled by $47.70 to $1,311.40 an ounce during the week covered by the latest CFTC report. May silver fell 88.3 cents to $19.979 as of March 25, while Nymex July platinum fell by $40.40 to $1,422.60.

Meanwhile, June palladium rose by $18 for the week to March 25 to settle at $789.40. Comex May copper added 5.4 cents to $3.0055 a pound.

Net long or short positioning in the CFTC data reflect the difference between the total number of bullish and bearish contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as contrarian signs of overbought or oversold markets that may be ripe for price corrections.

The CFTC releases both a “legacy” and “disaggregated” report for each commodity, with the latter meant to provide more detail but having a shorter history for comparison purposes since it was started only five years ago.

HSBC pointed out that the net long in gold finally fell after rising sharply over the prior 12 weeks.

“This may be due to investor profit taking from the fallout of the Crimea referendum to join Russia,” HSBC said.

Additionally, TD Securities said those speculators who wanted to establish short positions became more aggressive after the FOMC turned more “hawkish” than expected in a meeting that wound up on March 19.

At the time, gold fell, with traders saying the market was spooked when forecasts from individual Fed members suggested they collectively anticipate the federal funds rate rising from currently near zero to 1% by the end of 2015. Traders also said that Chair Janet Yellen’s remarks during a press conference led to an outlook that monetary tightening could start roughly six months after the end of the bond-buying program known as quantitative easing.

In the disaggregated report, the net long in futures and options among money managers had risen to 138,429 as of March 18 from 28,702 on Christmas Eve, a 12-week gain of 380%. In the most recent reporting week to March 25, however, the net length fell back to 120,042 lots as these accounts cut their total longs (bullish positions) by 14,708 lots, while adding to their total shorts (bearish bets) by 3,679.

In the legacy report, the net long of the large non-commercial accounts – commonly referred to as the funds -- had soared to 172,204 as of March 18 from 54,587 on Christmas Eve, a gain of 215%. But in the latest week to March 25, this net length fell back to 145,531 as non-commercials cut total longs by 18,253 while adding 8,420 gross short positions.

“The aggressive and persistent increase in gold speculative length over the last two months made the market increasingly vulnerable for a washout,” UBS said. “The hawkish tilt from the FOMC combined with easing safe-haven demand gave longs enough reason to cut back positions. Interestingly though, the correction has been relatively orderly and interest to buy the dip is evident. This reflects the underlying improvement in sentiment towards gold – investors are acknowledging the value of holding gold to diversify portfolios and insure against tail risks and are therefore looking for opportunities to get in at better levels.”

Still, UBS added, considering net length in gold rose by more than 200% from the beginning of the year through mid-March, the decline last week may not be enough to eliminate all of the speculative “froth” in the market.

Silver net length fell mainly because of more short positions, although there was also some long liquidation. Money managers scaled back their net length to 9,580 lots from 18,239. They cut total longs by 1,691 lots and added to their shorts by 6,968.

The non-commercials cut their net long in silver to 15,680 from 23,057. These accounts liquidated 1,087 total longs while adding 6,290 shorts.

Large Specs Cut Net Length In Platinum, Add To Copper Net Short

Large speculators cut their net length in platinum, while the change in positioning for palladium was mixed. These accounts added to their overall bearish position in copper.

The money managers in the disaggregated report cut their net long in platinum to 33,407 lots from 34,905 as the long liquidation (total longs fell by 2,205) exceeded the short covering (total shorts fell by 708).

Non-commercials cut their net long to 44,837 lots from 46,377, also with long liquidation (total longs fell by 2,315) exceeding short covering (total shorts fell by 775).

In palladium, net length fell slightly in the disaggregated report but rose slightly the legacy report.

“Palladium specs were particularly bullish in the options space as
prices broke above long-term trend lines to reach $800/oz, but
certain other specs saw it as an opportunity to short the metal,
which has benefitted handily from Russian supply risks,” TDS said.

Money managers in the disaggregated report trimmed their net long to 19,831 lots from 20,237. There was more fresh selling (total shorts rose by 897) than fresh buying (total longs rose by 490).

In the legacy report, the net long of non-commercials rose to 23,239 from 23,173. In this case, fresh buying (total longs rose by 777) exceeded fresh selling (total shorts rose by 711).

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Meanwhile, speculative selling continues in copper. TDS cited concerns about Chinese inventory stockpiles and the strength of demand, particularly if any metal currently tied up for financing deals should be released onto the market.
Money managers’ copper net short moved to 25,034 lots from 21,965 the prior week. They trimmed 477 total longs and added 2,592 to total shorts.

Non-commercials’ net short now stands at 32,943, compared to 28,301the prior week. They cut 3,586 total longs and added 1,057 to total shorts.

By Allen Sykora of Kitco News; asykora@kitco.com



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 precious metal products, 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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