Bulls Exit Gold Futures In Wake Of FOMC Meeting
(Kitco News) - Large speculators exited from gold and silver futures during the several days after the last meeting of the Federal Open Market Committee, based on the latest weekly positioning data from the Commodity Futures Trading Commission.
The data covered the week-long period through June 20 and included the trading activity after FOMC officials surprised markets by signaling that they are still thinking about further U.S. interest rate hikes even after another 25-basis-point increase this month. A number of Fed officials also delivered hawkishly construed speeches in the days immediately after the Fed outcome.
During the time period covered the most recent CFTC positioning report, Comex August gold fell by $24.40 to $1,244.10 an ounce. July silver lost 38.5 cents to $16.43.
“Both the gold price and the silver price have presumably been kept in check of late by the withdrawal of speculative financial investors…,” said Commerzbank analysts, citing the CFTC data.
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.
The most recent “disaggregated” report on Friday shows that the net-long, or bullish, position of money managers tumbled by 33% to 99,376 futures contracts from 147,496 the week before.
“The latest commitment of traders report shows sizeable long liquidation, while net futures and options length is sitting at a near five-week low,” said Sam Laughlin, senior precious-metals trader with MKS (Switzerland) S.A.
The liquidation is reflected by a 49,920 decline in gross longs. In fact, the number of short, or bearish, positions also declined, although by a modest 1,800 lots.
“Specs aggressively reduced their net-long exposure in response to [a] more hawkish-than-expected FOMC statement, which pointed to higher interest rates well into 2018, which would lift the opportunity cost of holding gold,” said TD Securities. “A firmer USD [dollar] and somewhat higher rates convinced investors to take profits, as many investors started to question the idea that the U.S. central bank is ready to cut the tightening cycle short.
“While there were those who cut long exposure, a smaller but still material group of money managers reduced their short positioning amid the belief the correction was overdone.”
Money managers’ net-long position in silver also fell, although this was due to a roughly even split between long liquidation and fresh selling. The net long stood at 26,319 futures contracts, down 40% from 43,930 the week before. The decline came as the number of gross longs fell by 8,625 lots, while the number of total shorts rose by 8,986.
“For the most part, silver followed the long liquidation dynamics started by gold, but investors also increased short positions,” TDS said.