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Are The Bears Losing Their Grip On Gold Prices? - Analysts Ask

Kitco News

(Kitco News) - Gold continues to hold critical support around $1,200 an ounce as speculative bearish bets remain at historic highs, according to the latest trade data from the Commodity Futures Trading Commission (CFTC).

The CFTC's disaggregated Commitments of Traders report, for the week ending Sept. 18, showed money managers dropped their speculative gross long positions in Comex gold futures by 2,689 contracts to 97,904. At the same time, short bets increased by 4,555 contracts to 180,367. Gold’s net-short positioning currently stands at 82,463 contracts.

“Speculative financial investors remain skeptical towards gold: net short positions climbed to 82,500 contracts again in the week to 18 September. This also completely reversed the previous week’s decline again,” said analysts at Commerzbank in a report Monday.

Gold’s net short positioning saw little change from the previous week and remains near August’s historic levels. However, despite the increased selling pressure, many analysts note that gold bears are losing control over the market. For the last six weeks, gold prices have been stuck around $1,200 an ounce.

While market participants continue to watch money manager positioning in the gold market, as this speculative “hot money,” can define the market’s short-term trend, many analysts are paying more attention to commercial positions which remains positive for the first time since 2001.

Commercial traders are traditionally net short as this group is made up of gold producers, and merchants that are hedging their positions in the marketplace.

Ronald-Peter Stoeferle, fund manager at Incrementum AG and one of the authors of the annual “In Gold We Trust” report, said in a recent interview with Kitco News that he sees the price action in gold as a coiled spring that is on the verge of breaking.

“Commercial positioning in gold looks particularly exciting for investors,” he said. “I think this is the best set up we have seen in gold in 16 or 17 years,” he said.

Although speculative positioning remains bearish, many analysts say that the market is poised for a short-covering rally; however, prices need to get above critical resistance at $1,236 an ounce before short sellers feel the pressure.

For many analysts, the spark to ignite a rally could come this week after the Federal Reserve monetary policy meeting. There are growing expectations that the central bank will tone down its hawkish stance on interest rates or at least leave the trajectory of interest rates unchanged.

“Gold has often gained following a Fed rate hike in the past,” said analysts at Commerzbank.

However, commodity analysts at TD Securities said that they are not expecting gold to break out of its current rut in the near-term.

“With the trade situation still very uncertain and the Fed set to increase interest rates next week, we do not anticipate any substantial rally or increased speculative positioning in precious metals,” they said in a report Friday.

The silver market also continues to struggle to attract attention as investors reduce their exposure to the precious metal across the board.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures dropped by 738 contracts to 52,301. At the same time, short positions fell by 2,062 contracts to 99,047. Silver’s net-short positioning was relatively unchanged from the previous week at 46,751 contracts.

This is the second week in a row that both the bulls and bears lowered their exposure to silver, which has struggled against its peers. The gold-silver ratio continues to hold near a more than 20-year high at 84.16 points.

During the survey period, silver prices were relatively stable as it struggles to find momentum below critical resistance at $14.50 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.