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Comex Gold Tumbles As Recent Longs Liquidate

Kitco News

(Kitco News) - Gold futures fell hard Thursday on an apparent exodus by some of the “fast funds” that previously had been buying into the market, traders said.

As of 10:48 a.m. EDT, Comex August gold was $15 lower to $1,278.20 an ounce. Just Tuesday, the contract had hit its highest level since mid-April, peaking at $1,298.80 an ounce, and a break of $1,300 had been seen as imminent.

A couple of New York-based traders commented that it’s hard to tell whether the move was triggered by a single large seller, since trading in futures is primarily electronic nowadays.

“It seems to have tumbled because people are liquidating,” said a desk trader.

He commented that the pullback comes after a “healthy” run-up in gold from a low below $1,220 in early May to nearly $1,300 this week. Now, traders are adjusting positions, he said, particularly with the U.S. dollar having a stronger tone.

Kevin Grady, president of Phoenix Futures and Options LLC, commented that a lot of traders had taken out long, or bullish, positions lately on a “fear trade.” Three major events are taking place Thursday – a European Central Bank meeting, congressional testimony by former FBI Director James Comey and U.K. elections.

“A lot of people are liquidating some of these positions,” Grady said.

Much of the activity lately has been “fast funds” that tend to get in and out of the market quickly, he added. He pointed out that the number of open positions has been changing by as much as 20,000 to 30,000 contracts per day lately, an unusually large amount.

“They get in and they get out. They get in and they get out. It’s fast funds that are trading the market, not longer-term speculators and not like real investors,” Grady said.

As of when he spoke shortly before 10:30 a.m. EDT, volume in August gold was already some 178,000 lots for the day, which he described as high for this time of day.

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