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Gold Bullish Positioning Climbs To 11-Month High

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(Kitco News) -Large speculators ramped up their bullish positioning in gold futures to an 11-month high during the most recent reporting period for data collected by the Commodity Futures Trading Commission.

“Investors flew to the safety of gold, as a North Korean missile flew over mainland Japan and as the U.S. and allies concluded their annual war games,” said a research note from TD Securities. “This, along with continued Fed policy ambiguity, prompted gold to breach the technically important $1,300/oz level. The yellow metal also strengthened following an uneventful Jackson Hole conference [of central bankers], which saw specs take comfort in holding their long tilt, as they continue to question whether inflation will rise as central bankers expect.”

The most recent CFTC report covered the week-long period through Aug. 29. During this time frame,
Comex December gold rose to $27.90 to $1,318.90 an ounce, while December silver gained 45.6 cents to $17.516.

Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) 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.

Investment in global exchange-traded funds has been rising, Commerzbank said.

“Speculative financial investors are also continuing to bet on rising gold prices,” said analysts at the bank, pointing out that money managers’ net bullish position is now at the highest level in 11 months.

The gold net-long position of money managers in the CFTC’s “disaggregated” report rose to 221,126 futures contracts in the week to Aug. 29 from 194,079 the week before. The number of gross longs jumped by 25,348 lots. There was also some short covering, as reflected by a 1,699 decline in total shorts.

“Silver specs also increased net-long positioning, largely due to aggressive short covering,” said TDS. “But, intriguingly money managers continue to add a smaller proportion to long interest in silver as they have in other precious metals. We continue to expect silver to outperform gold, as the laggard of recent times turns into the leader, especially considering the strong base-metal performance and increased industrial demand expectations of late.”

Managers’ collective net-long silver position rose to 52,429 futures contracts from 44,247  the week before, as traders bought to cover short positions. The number of total shorts fell by 6,397 lots. There was also fresh buying, as gross longs climbed by 1,785.

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