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Money Managers Trim Bearish Gold Position But May Have Gone Back

Kitco News

(Kitco News) - Money managers trimmed their bearish positioning in gold during the most recent reporting week for data compiled by the Commodity Futures Trading Commission, although these accounts have likely reversed course since and are accumulating bearish positions again, analysts said.

During the week-long period to Nov. 6 covered by the report, Comex December gold gained $1 to $1,226.30 an ounce, while December silver climbed 3.8 cents to $14.50.

Since Nov. 6, however, both metals have fallen again, which is why observers say speculators may have again become more pessimistic on prices. As of 9:39 a.m. EST, December gold was at $1,205.50 an ounce, while December silver was at $14.04.

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 shows that the net-short position of money managers fell to 47,446 futures contracts as of Nov. 6 from 55,523 the week before. The bulk of the decline was short covering, as the number of gross short positions fell by 5,994 lots. There was also some fresh buying, as total longs climbed by 2,083.

Commodities brokerage SP Angel commented that the data show that money managers were “reluctant to bet against gold” during the latest CFTC reporting week. TD Securities said that “still-shaky equities and prospects of [U.S. political] gridlock prompted money managers to aggressively cover short positions.”

Nevertheless, money managers have likely increased their bearish posture since, said Commerzbank.

“Though speculative financial investors reduced their net-short positions in gold somewhat in the week to 6 November, net short positions are likely to have been increased again in the meantime given that the price has fallen by approximately $30 since then,” the German bank said.

TDS said “the Fed's affirmation that it will be sticking to its preset hiking path prompted the market to revalue lower the strike level on any potential Powell put — which ultimately helped the greenback strengthen and challenged gold prices. With tail risks out of the way, we would not be surprised to see gold length resume its downward trajectory for now.”

In the case of silver, the net-short position of money managers fell to 20,848 lots from 25,176 the week before as the amount of short covering exceeded the long liquidation. Gross short positions fell by 7,219 lots, while the number of total longs fell by 2,891.

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