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Hedge Funds Fleeing Gold Market, Running To Stocks, Bitcoin

Kitco News

(Kitco News) - Momentum in gold is starting to fade as hedge funds on both sides of the trade pull up their stakes, according to the latest trade data from the Commodity futures Trading Commission.

Bullish sentiment in the gold market declined for the seventh consecutive week as overall interest in the precious metals continued to fall. Gold is seeing its longest liquidation period in nearly a year.

“Since [gold’s] mid-September high, net-long positions have fallen by a good third,” said analysts at Commerzbank.

The disaggregated Commitments of Traders report for the week ending Oct. 31 showed money managers decreased their speculative gross long positions in Comex gold futures by 10,049 contracts to 182,652. At the same time, short bets also declined by 7,646 contracts to 16,687. Gold’s net length has fallen to 165,965 contracts.

Falling interest in gold has kept prices in a fairly narrow range. Gold futures prices fell 0.61% during the survey period. Analysts note that gold is caught between support at its 200-day moving average at $1,268.60 an ounce and resistance at its 100-day moving average at $1,280.40 an ounce.

George Gero, managing director with RBC Wealth Management, said it could be difficult for gold to rally as the marketplace shrinks. He added that the market is suffering because it continues to compete against equity markets.

“Stocks are at record highs, so you don’t need gold,” he said. “Gold will turn around when equities start to correct.”

But, it’s not just stocks.

Bart Melek, head of commodity strategy at TD Securities, said that a stronger U.S. dollar and the planned launch of bitcoin futures on the Chicago Mercantile Exchange took its toll on gold. However, he added that he sees the potential for higher prices on short covering as investors take some profits after all the events seen last week.

“Now that [Federal Reserve Governor Jerome] Powell has been tapped by President Trump [to be next Fed chair], we could see some traders take further profits on their short positions,” said Melek. “Furthermore, poor employment data released Friday, especially the lack of wage pressures, could see some interest return as continued inflation weakness will see doubts about the 2018 dots grow.”

While investors are fleeing the gold market, bearish sentiment in the silver market is growing

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 1,808 contracts to 73,090. At the same time, short positions rose by 4,797 contracts to 15,357. Silver’s net length now stands at 57,733 contracts.

The renewed selling pressure caused silver prices to fall more than 1.6% during the survey period.

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.
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