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Money Managers Slash Net-Bullish Gold Positioning

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(Kitco News) - Large speculators cut their net-bullish positioning in gold futures by more than half during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

Analysts cited a stronger U.S. dollar, improved sentiment in equities and a slight uptick in Treasury yields.

During the week-long period to April 2 covered by the report, Comex June gold fell $26 to $1,295.40 an ounce, while May silver lost 36.8 cents to $15.0651.

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.

Money managers’ collective net-long position in the disaggregated report fell to 24,618 futures contracts from 57,987 the week before. The bulk of the decline was through liquidation, as the number of total longs fell by 24,557 lots. There was also fresh selling, as reflected by an increase of 8,812 gross shorts.

“Firming growth expectations, a strong USD [U.S. dollar] and a robust level of risk appetite in global equity markets prompted money managers to aggressively cut their net exposure to gold last week,” said TD Securities. “Investors cut long exposure as the prospects for a sustained rally faded amid growing optimism that there will be a continued inflow of funds in risk markets. At the same time, a drop in prices amid a modest popup in yields convinced traders to takeout new shorts, as prices neared technical levels which could be conducive to additional downside.

“For now, firm U.S. data and well performing equities should keep investors away from the yellow metal, which should also see range-bound price action.”

Others, however, hinted that the lower net length creates an opportunity for participants who exited to come back into the market again.

“The headwind from speculative financial investors is also likely to have abated after net-long positions were slashed by more than half…,” said Commerzbank.

In the case of silver, money managers’ flipped to a net-short position of 1,724 futures contracts after having been net long by 12,306 the week before. The bulk of the turnaround was fresh selling, with the number of total shorts rising by 13,656 lots.

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