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Funds Increase Bullish Position In Gold Futures

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(Kitco News) - Large speculators upped their bullish positioning in gold futures – although likely only temporarily -- during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

However, these accounts may well have cut their bullish posture since then, as gold prices have shed more than $20 an ounce since the April 9 cutoff date for the last CFTC report, analysts said.

During the week-long period covered by the data, Comex June gold rose to $12.90 to $1,308.30 an ounce, while May silver climbed 15 cents to $15.211.

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 a decade ago and meant to offer more detail.

The disaggregated report showed that money managers hiked their net-long position to 37,037 futures contracts in the week to April 9, up from 24,618 the prior week. The increase occurred due to both fresh buying (an increase of 7,101 gross longs) and short covering (as reflected by a decline of 5,318 total shorts).

“Funds were probably looking at the Federal Reserve being more accommodative,” said Phil Flynn, senior market analyst with Price Futures Group.

That would prompt expectations for a softer U.S. dollar and as a result, help prop up gold, he continued.

“Following a corrective USD [U.S. dollar] trend, stronger gold prices … prompted money managers to load up,” said TD Securities. “Specs aggressively grew their long exposure as they expected the Fed to stress their dovish bias in the FOMC [Federal Open Market Committee] minutes, and in reaction to the previous week's lackluster equity performance. The move above $1,300/oz also prompted short covering, which further increased length.”

Since the cutoff for the last CFTC report, however, gold has fallen back below $1,300 an ounce amid increased risk sentiment. This means investors since have likely reduced their long exposure to gold, TDS added.

Meanwhile, in silver, the funds increased their net-short position slightly to 2,532 futures contracts from 1,724 the week before. This occurred as the amount of long liquidation (decline of 2,573 total longs) outpaced the short covering (decline of 1,765 gross shorts).

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