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Money Managers Increase Net Bearish Positioning In Gold

Kitco News

(Kitco News- Large speculators increased their net bearish positioning in gold during the most recent reporting week for data compiled by the Commodity Trading Commission but trimmed their bearishness in silver slightly.

During the week-long period to Nov. 27 covered by the report, Comex February gold fell $7.10 to $1,219.90 an ounce, while March silver lost 16.8 cents to $14.221.

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 “disaggregated” report shows that money managers increased their net-short position in gold futures to 58,390 contracts from 51,851 the week before. This occurred due to both long liquidation (gross longs fell by 4,364 lots) and fresh selling (gross shorts rose by 2,175).

Still, while gold was sold, the net-short positioning remained within the range of the last couple of months, said Ole Hansen, head of commodity strategy at Saxo Bank.

“Money managers aggressively unwound their gold longs, as the USD [U.S. dollar] surged to its highest since mid-2017 amid market turbulence that directed funds into the safety of America,” said a research note from TD Securities. “Specs liquidated exposure to the yellow metal, believing that yields could rise further, even as risk appetite waned, which prevented the movement of funds into the precious metals assets.

“However, following Fed's [Chair Jerome] Powell’s fine-tuning mid-week, it is likely that specs increased gold length — driven by a reversal of the USD rally and a drop in yields.”

TDS was referring to remarks from Powell suggesting that policymakers may be closer to a “neutral” level on interest rates, whereas previously he had suggested this was still a ways away.

Meanwhile, in the case of silver, the net-short position didn’t change much as both short and long positions were reduced, Hansen said.

Money managers trimmed their net short slightly to 31,638 lots from 32,714 the week before. This occurred as the amount of short covering (total longs fell by 3,720) outpaced the amount of long liquidation (gross longs fell by 2,644).

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