Hedge Funds Ramp Up Gold Short Bets To New Highs – CFTC DataBy Neils Christensen
Tuesday July 07, 2015 13:45
(Kitco News) - Pessimism in the precious metals markets appears to be hitting all-time highs as speculators cut their long positions and increase short bets in gold and silver, according to the latest data from the Commodity Futures Trading Commission (CFTC).
According to the disaggregated Commitment of Traders Report (COTR), for the week ending June 30, money-managed speculative gross long positions of Comex gold futures fell by 9,655 contracts to 115,188. At the same time, short-sellers exited their positions by 14,638 contracts to 99,565. Gold's net length now stands at 15,623 contracts.
Comex August gold futures prices fell slightly less than 0.5% during the survey period, which saw consistent selling pressure on any short-term buying momentum.
In a note to clients Monday, commodity analysts at Commerzbank noted that gold’s net long positions fell almost 50% from the previous week and are now at their lowest level in three months. At the same time, gross speculative short positions now sit at record highs.
“Speculative financial investors continue to pose an obstacle to any price rise,” they said.
Bart Melek, head of commodity strategy at TD Securities, said the shift in speculative positioning is a result of growing expectations that the Federal Reserve will raise interest rates as early as September.
However, he added with shorts at extreme levels, he could see a short-covering rally in the near-term as markets readjust their interest rate expectations.
“At some point, people have to start asking themselves if they really think the Fed can raise rates in this environment,” he said. “The U.S. dollar is surging, oil prices are falling and there is growing dislocation in global markets.”
The silver market also experienced growing negative sentiment as its speculative net short positions have expanded. The CFTC disaggregated COTR showed money-managed speculative gross long positions of Comex silver futures fell by 1,982 contracts to 44,153. At the same time, short contracts rose by 1,470 contracts to 54,774. The silver market is now net short 10,621 contracts.
In the short term, it also doesn’t appears that the pessimism and short bets are going to reverse anytime soon as markets are reeling from heavy selling pressure Tuesday. During the session, Gold prices fell more than 2%, hitting low of $1,146.80 and silver futures dropped almost 7% during the day, hitting a low of $14.620.
Ole Hansen, head of commodity strategy at Saxo Bank, agreed that the short side in precious metals is at extreme levels, but unless there is a major turnaround this side could continue to grow. However, that could be unlikely as precious metals haven’t been unable to gain a safe-haven bid in the wake of growing uncertainty in Europe amidst Greece’s credit crisis.
“As long as prices continue to fall, investors will keep piling into the shorts,” he said. “We need a counter reaction and I just don’t think there is anything out there that will do it.”