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Money Managers Slash Bullish Positioning In Gold Futures

Kitco News

(Kitco News) - The most recent data from the Commodity Futures Trading Commission confirms what many analysts were predicting – money managers sharply reduced their bullish positioning in gold during the latest reporting week.

The CFTC late Friday released positioning data for the week through Tuesday, June 19. Since prices fell sharply a few days after that cut-off date, expectations were that the latest report would show that hedge funds scaled back their bullish posture, and that’s exactly what happened.

During the week-long period to June 19 that was covered by the report, Comex August gold fell by $20.80 to $1,278.60 an ounce, while July silver lost 56.8 cents to $16.323.

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 the net-long position of money managers fell to 10,528 contracts from 55,504 the week before. The biggest share of the decline was fresh selling, as the number of short positions soared by 34,960 lots. There was also a material exodus from bullish positions, as the number of total longs fell by 10,016.

Commerzbank analysts said gold faced a “considerable headwind from speculative financial investors” as the net long declined to the lowest level in two and one-half years, thereby “contributing significantly to the slide in the gold price.”

Phil Flynn, senior market analyst with at Price Futures Group, commented that gold has been hurt lately by strength in the U.S. dollar.

“There is some concern that the [U.S.-]Chinese trade war could lower Chinese demand for gold,” he said. Presumably, if China’s economy slows, Chinese citizens would have less money to spend on the precious metal.

Additionally, Flynn said, some gold bulls may have simply thrown in the towel since the precious metal has been unable to stage a meaningful rally for weeks now.

“Because the market hasn’t performed well, people are shying away from gold,” Flynn said.

Bullish money-manager positioning in silver also fell although many of the fresh longs from the week before remained in the market. The net-long position of these accounts declined to 27,736 futures contracts, down from 40,744 in the week to June 12 but still several times higher than the 4,619 net-long position as of June 5.

During the most recent reporting week, the number of gross longs fell by 8,665 after they had increased by 20,103 during the prior reporting week. Meanwhile, the number of total short positions climbed by 4,343 lots.

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