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Funds Up Bullish Gold Position, Slash Net Short In Silver

Kitco News

(Kitco News) - Large speculators slightly increased their net-bullish positioning in gold futures, while slashing their net-bearish stance in silver, during the most recent reporting week for data compiled by the U.S. Commodity Futures Trading Commission.

However, analysts pointed out, the next report – due out Friday – will likely show that the bullish posture in gold has since fallen, as prices have weakened since the April 17 cut-off date for the last CFTC report.

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.

During the week-long period to April 17 covered by the report, Comex June gold futures rose by $7.40 to $1,350.50 an ounce, while May silver climbed 21.5 cents to $16.785.

“Speculative financial investors showed somewhat greater optimism towards gold again,” said Commerzbank. “That said, the price slide in the interim suggests that some long positions have already been covered again.”

Comex gold has lost 1.8% since the cut-off date for the last report and was trading at $1,325.60 as of 10:49 a.m. EDT Monday.

The disaggregated report showed that money managers increased their net-long position in gold futures to 132,638 futures contracts from 125,562 in the previous week. This occurred as the number of gross longs rose by 3,881 lots and the number of total shorts fell by 3,195.

“A range-bound gold [market] only managed to attract small buying interest with traders instead finding a better opportunity in silver,” said Ole Hanson, head of commodity strategy with Saxo Bank. “Silver’s record short was cut by 60% in response to the improved outlook as it benefited from the tailwind seen across other industrial metals.”

Money managers slashed their net-short position in silver futures to 14,757 lots from 37,112 the week before.

TD Securities pointed out that bulls returned to the market at the same time traders with short positions were forced buy in order to cover, or offset, their trades. This was reflected by a decline of 16,300 gross short positions at the same time that total longs rose by 6,055.

“However, with money-manager positioning still hovering around extreme lows, silver continues to reflect extremely bearish sentiment across the speculative community,” TDS said. “But while silver's industrial luster gives it a boost and as the precious-metals environment improves amid a flat yield curve, shorts could very well be forced to cover. In fact, with prices trading right below key resistance levels, price action in the coming weeks could lead to a sharp short-covering rally.”

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