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Money Managers Trim Bearish Position In Gold Slightly

Kitco News

(Kitco News) - Large speculators maintained net bearish positioning in gold futures although they scaled this back some during the latest reporting week for data compiled by the Commodity Futures Trading Commission.

During the week-long period to Oct. 2 covered by the report, Comex December gold upticked by $1.90 to $1,207 an ounce, while December silver climbed 20 cents to $14.693.

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 commission issues two reports each Friday -- a so-called “legacy” report and a “disaggregated” report, started in 2009 and meant to offer more detail.

Money managers have been positioned bearishly for some time, but the data show that the pessimism of these accounts did not increase, pointed out analysts with Commerzbank. They noted that the week to Oct. 2 brought about “moderate short covering in gold and also in silver.” Short covering is when traders with bearish, or short, positions enter the market to buy in order to exist or cover their positions.

The disaggregated report showed that the net-short gold position of money managers fell modestly to 79,603 futures contracts from 83,677 the week before. The number of longs climbed by 2,158 lots, while the number of shorts declined by 1,916.

Overall, speculative investors maintained “their bearish stranglehold on the yellow metal as Fed Chair [Jerome] Powell's statements looked to assure the market that the removal of ‘accommodative’ did not signal any policy change,” said a research note from TD Securities.

“In addition, disappointing economic data in China saw the yuan weaken, while a recent steepening of the U.S. yield curve also helped to further bolster the negative precious metals outlook,” TDS said. “So long as the USD [U.S. dollar] and Fed expectations remain unchanged, we expect that interest in precious metals will remain muted.”

Meanwhile, in silver futures, money managers trimmed their net-short position to 36,070 contracts from 42,683 the week before. This was due to short covering, as the number of total shorts declined by 8,611. In fact, the net-short position declined even though the number of longs also fell to the tune of 1,998 contracts.

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