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Net Bearish Positioning In Gold Futures Wiped Out

Kitco News

(Kitco News) - Money managers have virtually eradicated the once-large net-bearish position they held in gold futures, with the most recent report from the Commodity Futures Trading Commission showing the market is now balanced.

Traders bought in order to cover short, or bearish, positions in both gold and silver during the week to Dec. 11.

During the week-long period to Dec. 11 covered by the report, Comex February gold edged up 60 cents $1,247.20 an ounce, while March silver slipped 1.2 cents to $14.628.

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.

In the “disaggregated” report, money managers’ net-short position was nearly wiped out, falling to a mere 66 futures contracts from 9,787 contracts the week before. Two weeks ago, the net short stood at 58,390.

“According to the CFTC’s latest statistics, net-short positions – which until the end of November were still considerable – were eradicated completely in the space of two weeks,” said Commerzbank. “The position adjustments via the futures market amount to 181 tons. This equates to somewhat more than six months of industrial demand.

“Measured against this, the price rise was actually rather moderate. This was due to a firmer U.S. dollar that climbed on Friday to an 18-month high on a trade-weighted basis.”

The decline during the most recent reporting week occurred due to short covering, as reflected by a 19,193 fall in total shorts. There was also long liquidation, as gross longs fell by 9,472 lots.

TD Securities said gold has continued to catch a bid after Dallas Fed President Robert Kaplan flagged risks from slowing global economic growth, along with the fading tailwinds of U.S. fiscal stimulus and headwinds from trade uncertainty.

“These factors all contributed to helping gold break $1,240/oz resistance, which prompted many to aggressively cover their shorts,” TDS said. “That being said, while equities have increasingly reflected fears that stocks will no longer remain a one-way
bet, speculators have continued to prefer liquidating their gold longs rather than increasing their positions for the time being.”

Meanwhile, money managers’ net-short position in silver futures contracted to 9,154 lots from 22,277 the week before. This was due mostly to short covering, as reflected by a 9,782 decline in gross longs. However, there was also fresh buying, reflected by an increase of 3,341 total longs.

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