Money Managers Hike Bearish Gold Positioning
(Kitco News) - Large speculators increased their bearish positioning in gold futures by 67% during the most recent reporting week for data compiled by the Commodity Futures Trading Commission, which analysts say accounts for much of the slide in prices during the early part of November.
During the week-long period to Nov. 13 covered by the report, Comex December gold fell 2% to $1,201.40 an ounce, while December silver lost 3.6% to $13.977.
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.
“The price slide that began early this month and continued into last week was driven to a large extent by speculation, as the CFTC’s statistics on the positioning of speculative market participants show,” said analysts at Commerzbank.
However, they added, since the price has recovered some since the cutoff date for the last CFTC report, some short positions are likely to have been squared since.
The “disaggregated” report showed that money managers upped their net-short position to 79,194 contracts from 47,446 the week before. This was mostly due to fresh bearish positions, as the number of total shorts surged by 29,089. There was also some light long liquidation, as gross longs fell by 2,659 lots.
Analysts at TD Securities said traders re-entered short positions in gold as the U.S. dollar made fresh longtime highs in response to a hawkish Federal Reserve Chairman Jerome Powell.
“But shortly after printing the $1,200/oz mark, the yellow metal was rescued by safe-haven bids and short covering,” TDS said. “Indeed, European politics in the form of thorny Brexit negotiations provided some interest, while Fed speakers on Friday sounded a much more dovish tone in regards to a global slowdown which saw the greenback and rates come off the highs.
“These factors should provide short-term support, but we maintain the view that a fundamental shift in the strong dollar regime will be needed before gold can break materially higher.”
In silver futures, money managers’ net-short positioning nearly doubled to 40,833 lots from 20,848 the week before. These accounts hiked their gross shorts by 16,035 lots, while trimming longs by 3,950.
“In our opinion, this means that speculative financial investors were also chiefly responsible for the latest pronounced slide in the silver price to below the $14 per troy ounce mark,” Commerzbank said.