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Money Managers Slash Bearish Positioning In Gold Futures

Kitco News

(Kitco News- Money managers cut their net-bearish positioning in gold futures by 83% during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

For both silver and gold, the majority of the shift came in the form of short covering, in which traders buy in order to exit positions in which they had gone short, or placed a bearish bet.

“As such, they played a major part in driving up the gold price,” said Commerzbank. “Given that gold has risen even further in the meantime, further short positions are likely to have been closed.”

The report covers the week-long period through Dec. 4. It was released Monday afternoon instead of the usual Friday because government offices were closed one day last week for President George H.W. Bush’s funeral.

During the week-long period covered by the report, Comex February gold surged by $26.70 to $1,246.60 an ounce, while March silver climbed by 41.9 cents to $14.64.

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 showed that money managers slashed their net-short position in gold futures to 9,787 contracts from 58,390 the week before. This was fueled by both short covering and fresh buying, with gross shorts declining by 29,181 lots and total longs rising by 19,422.

“Following an increasingly dovish sounding tone from Fed Chair [Jerome] Powell, in combination with trade optimism after the G20, the USD [U.S. dollar] moved lower and the Chinese yuan strengthened, to the benefit of precious metals,” said a research note from TD Securities.

“Furthermore, an extreme flattening of the U.S. yield curve amid growth concerns as the fiscal stimulus boost wears off, along with equity-market weakness and data disappointments, saw the yellow metal become more attractive. Should the Fed signal a cautious approach for 2019 hikes, that could be the catalyst needed to see gold breakout toward $1,300/oz.”

In the case of silver, money managers cut their net-short position to 22,277 contracts from 31,638 the week before. The bulk of the decline was due to short covering, as total shorts fell by 8,079 contracts. There was also some fresh buying as reflected by an increase of 1,282 longs.

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.

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