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Are The Gold Bears Getting Tired?

Kitco News

(Kitco News) - According to some analysts, there is further evidence that gold’s selling momentum is running out of steam as the latest trade data from the Commodity Futures Trading Commission showed little change in bearish gold sentiment.

The CFTC's disaggregated Commitments of Traders report for the week ending July 3 showed money managers increased their speculative gross long positions in Comex gold futures by 3,127 contracts to 107,402. At the same time, short bets rose at a slightly faster pace, increasing by 4,400 contracts to 109,929. Gold's net-short positioning stands at 2,527.

The continued selling pressure kept gold prices at the bottom end of their current range near a one-year low, below the critical psychological level of $1,250 an ounce.

Bill Baruch, president of Blue Line Futures, said that despite the continued weakness, he still sees value in gold at current levels.

“The overall managed-money short position of 109,929 contracts is the highest level since December 2015 when gold bottomed, and shorts amassed 110,836 contracts,” he said.

Commodity analysts at Commerzbank continue to be frustrated with the price action in the gold space as they don’t think the selling pressure justifies the current price level.

“Admittedly, speculative market participants have been betting for the most part on falling gold prices – they have not significantly expanded their net-short positions in the past two weeks,” they said.

While some investors are optimistic on gold as a contrarian investment opportunity, others note that the market still has one dominant beast to fight: the U.S. dollar.

In a recent interview with Kitco News, Lukman Otunuga, research analyst at FXTM, warned investors that gold will continue to be at the mercy of the U.S. dollar. He added that a surging U.S. economy and expectations of tighter monetary policy will continue to support the greenback and weigh on gold prices.

“Even though there is a lot of uncertainty, it seems that the U.S. dollar continues to steal gold’s spot as the new safe haven,” he said. “Economic sentiment for the U.S. economy remains extremely bullish, so investors are more inclined to buy U.S. dollar and equities than gold.”

Some analysts have noted that despite gold’s extended bearish positioning, the market could see further selling in the current environment as season factors will also weigh on sentiment.

The silver market also saw a modest increase in bearish sentiment last week. The precious metal has seen its net-long positioning contract fall for four straight weeks.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 3,434 contracts to 68,829. At the same time, short positions also fell by 1,240 contracts to 61,002. Silver’s net length currently stands at 7,827, only slightly lower from the previous week’s level.

The modest selling pressure was enough to keep silver prices near a one-year low, below $16 an ounce.

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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