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Money Managers Resume Building Bearish Gold Positioning

Kitco News

(Kitco News) - Money managers resumed building bearish positioning in gold and silver futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

This comes after these accounts had trimmed their bearish posture in the prior week’s report.

During the week-long period to Sept. 4 covered by the most recent data, Comex December gold fell by $15 to $1,199.10 an ounce. December silver lost 71.9 cents to $14.18.

“The nascent recovery in gold appears to be cut short as hedge funds continue their bearish bets in bullion futures and options,” said a research note from commodities brokerage SP Angel.

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 upped their net-short position in gold futures to 82,722 contracts from 75,772 the week before.

TD Securities pointed out that large speculators both liquidated long positions and resumed adding shorts after these accounts had been buying to cover shorts in the previous CFTC reporting week. In the week to Sept. 4, money managers’ long positions fell by 4,320 contracts, while there was an increase of 2,630 fresh shorts.

“The yellow metal has found its footing just below $1,200/oz, but the current environment remains unattractive for precious metals, making it unlikely that the yellow metal will be able to muster any sustainable rally in the near term,” TDS said. “Indeed, as the U.S. economy continues to perform well, highlighted by the recent jobs report which showed strong wage inflation, and emerging markets remain under pressure, rates and the dollar will continue to constrain precious metals.

“A roaring U.S. economy suggests that the Fed will continue with the path of hikes indicated by the dots and that the U.S. dollar will remain attractive, especially as EM [emerging-market] weakness continues.”

Nevertheless, the sizeable bearish positioning “is supportive for further short covering,” said MKS (Switzerland) S.A. However, the market would need a catalyst.

Meanwhile, in silver, the net-short position of money managers increased to 48,923 contracts from 35,705 the week before. The majority of the increase was fresh selling, as reflected by an increase of 8,347 shorts. There was also long liquidation, with gross longs declining by 4,871 contracts.

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