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Money Managers Trim Gold Bullish Positioning, Hike Silver Net Length

Kitco News

(Kitco News) - Large speculators cut their net bullish positioning in gold futures but upped their bullish stance in silver during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

The price action reflected those changes in positioning. During the week-long period to June 4 that was covered by the report, Comex August gold slipped $6.80 to $1,304.10 an ounce, while July silver rose 5.8 cents to $16.431.

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 CFTC’s “disaggregated” report showed that money managers trimmed their net long in gold futures to 50,880 contracts from 54,001 the week before. This occurred as traders exited from both sides of the market but closed out more long positions than short. The number of gross long positions fell by 7,855 lots, while the number of shorts declined by 4,734.

“We saw a relatively quiet week in metals with gold struggling to break away from $1,300/oz ahead of the near-certain U.S. rate hike on June 13,” said Ole Hansen, head of commodity strategy at Saxo Bank.

TD Securities said gold speculators reduced their positions with the next FOMC meeting on the horizon. Policymakers meet Tuesday and Wednesday. They are expected to hike interest rates another 25 basis points, with markets focused on any commentary hinting on the pace of future tightening.

“Indeed, stronger [U.S.] jobs and wages data, along with unemployment down to 3.8%, helped solidify Fed expectations,” TDS said. “On the other hand, 10-year rates falling back below 3% amid European political drama, and the recent easing of dollar strength, have prevented material weakness.

“Price action will likely remain muted/slightly weaker heading into the meeting, but a ‘dovish hike’ and talk of an inflation overshoot could be the catalyst needed to reignite spec interest.”

Meanwhile, in silver futures, money managers upped their net-long position to 4,619 lots from 791 the week before. This was mainly due to fresh buying, as gross longs climbed by 3,721 contracts.

Hansen commented that silver showed “signs of life” as the gold/silver ratio hit a four-month low.  The ratio measures how many ounces of silver it takes to buy an ounce of gold. A decline means an outperformance by silver prices, and vice-versa.

The small net-long means there is “plenty of space for additional buying should the technical and/or fundamental outlook (Industrial metals rally) continue to improve,” Hansen said.

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