Large Speculators Slash Net-Short Position In Comex Gold--CFTC Data
Monday January 11, 2016 10:40
(Kitco News) - Large speculators cut their net-short positioning in gold futures at the start of last week as global equities came under pressure, according to the most recent weekly positioning data from the Commodity Futures Trading Commission.
The data suggest both short covering -- in which speculators buy to exit or offset bearish positions they previously sold -- as well as fresh buying.
The most recent report covers the week through Jan. 5. During the week-long period, Comex February gold rose by $10.40 to $1,078.40 an ounce, while March silver climbed 4.3 cents to $13.971.
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 signs of overbought or oversold markets that may be ripe for price corrections.
“Money managers…appear to be jumping on the bandwagon; in the week to 5 January, they slashed their net-short positions by 41% to 15,900 contracts, putting them at their lowest level in seven weeks,” said Commerzbank.
More specifically, money managers in the disaggregated report cut their net-short position to 15,927 futures contracts as of Jan. 5 from 27,201 the prior week. This bulk of the reduction was short covering, as total shorts fell by 7,613 lots. There was also fresh buying, as gross longs climbed by 3,661.
“Volatility in global equity markets along with the accompanying market doubts that the Federal Reserve will pull the trigger on higher rates in the early part of 2016 and higher prices prompted gold investors to robustly grow their long exposure and aggressively cover short positioning,” said TD Securities. “The fact that net gold long positions jumped an equivalent of 1.2% of open interest (727.6K ounces) was likely the catalyst which helped to drive prices to recent highs of $1,110/oz.”
The market may well have further cut the gold net-short position through the remainder of last week, as prices continued to rise after the Jan. 5 cut-off for the most recent data.
“The risk-off tone (in other assets) so far this year likely spooked more shorts last week, which should be reflected in the report due this coming Friday,” UBS said. “More than the extent of short covering, it will be interesting to see whether gross longs have continued to rebuild positions, which would suggest an improvement in investor interest.”
Short covering also occurred in silver.
Money managers’ collective net-long position rose to 7,891 futures contracts from 7,139. This occurred as these accounts trimmed their gross short positions by 908 lots, although they also cut net longs by 156 (long liquidation).
By Allen Sykora of Kitco News; email@example.com