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Funds Up Net Long In Gold, Add To Silver Net Short

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(Kitco News) -Large speculators increased their bullish positioning in gold futures but also upped their net bearish position in silver during the latest reporting week for data compiled by the Commodity Futures Trading Commission.

During the week-long period through Feb. 20 that was covered by the report, Comex April gold was nearly flat – falling 60 cents to $1,331.40 an ounce. March silver
fell 13.5 cents to  $16.40.

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.

The commission issues two reports each Friday -- a so-called “legacy” report and a “disaggregated” report, started in 2009 and meant to offer more detail.

The disaggregated report shows that money managers increased their net-long position in gold to 175,455 lots from 169,757 the prior week. This was due to mainly to fresh buying, as gross longs rose by 4,215 contracts, as well as short covering, which was reflected by a drop of 1,483 total shorts.

“Gold specs increased their net length, as traders added to their longs and sharply covered their shorts as the yellow metal neared $1,360/oz once again,” said a research note from TD Securities. “But amid more confidence with respect to the growth outlook, concerns about higher rates have been mounting, which prompted a bounce in the dollar that gave no respite to gold bugs. However, angst that the Fed may be behind the curve could well prompt investor interest in gold to grow.”

In silver, money managers’ net-short position now stands at 10,522 lots, compared to a net short of 8,290 the previous week. This was due to a combination of long liquidation, as gross longs fell by 1,310 lots, and fresh selling, as reflected by an increase of 922 total shorts.

“Speculative financial investors expanded their net long positions in gold for the first time in four weeks in the week to 20 February, whereas silver saw a further rise in speculative net shorts,” Commerzbank said. “This is consistent with the increase in the gold/silver ratio to a good 81 in the reporting week.”

The gold/silver ratio measures how many ounces of silver it take to buy an ounce of gold, with a large number meaning silver is underperforming gold.

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