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Money Managers' Bullish Gold Positioning Hits 2017 High

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(Kitco News) - The most recent data collected by the Commodity Futures Trading Commission shows that money managers have pushed their bullish gold positioning to the highest level of 2017, analysts said.

During the week-long period to Sept. 5 that was covered by the CFTC report, Comex December gold rose $25.60 to $1,344.50 an ounce, while December silver climbed 42.5 cents to $17.941.

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 upped their gold net-long (bullish) position in the “disaggregated” report to 237,188 futures contracts, compared to 221,126 in the prior week. This was due to fresh buying, as reflected by an increase of 16,424 longs. There was a modest 362 rise in gross shorts (bearish trades).

“Gold specs continued to increase net length this week, with long positioning setting a record for 2017 as specs aggressively added longs, which more than offset the modest increase in shorts,” said a research note from TD Securities.

“The threat of North Korean missiles, along with the growing market consensus that the U.S. central bank will not hike rates, helped gold rally to highs not seen since September of last year. However, speculators will need the Fed to provide additional certainty that it will delay the next rate hike before they add to their long exposure and further lift prices from current levels.”

Sam Laughlin, senior precious-metals trader with MKS (Switzerland) S.A., pointed out that the next round of data could show even greater net length since prices continued to rally from the Aug. 29 cutoff date of the prior report to a fresh longtime high on Friday. Of course, this could change if the metal falls too sharply heading into this week’s Tuesday cutoff for the next CFTC data, erasing any new net  length that may have occurred in recent days.

Meanwhile, in silver futures, the funds’ net length climbed to 62,178 lots from 52,429 the prior week. As was the case the prior week, however, this was largely due to short covering in which traders buy to exit from bearish positions. Gross shorts declined by 6,879 lots, although there was also some fresh buying, as shown by a 2,870-lot increase in total longs.

“Silver specs continued to increase net-long positioning, as specs aggressively covered their shorts and modestly added to new longs. But, in sharp contrast to the yellow metal, silver specs have plenty of room to grow their long exposure,” TDS said. “We continue to expect silver to outperform gold, as the silver metal remains cheap relative to gold, despite the recent strong precious-metal sentiment and robust fundamentals.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.