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Funds Reverse Course, Hold Net-Bearish Position In Gold Futures

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(Kitco News) - Large speculators reversed from a net-bullish to a net-bearish position in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.

During the week-long period to April 16 covered by the data, Comex June gold tumbled $31.10 to $1,277.20 an ounce, while May silver lost 29.6 cents to $14.915.

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 stood net short by 15,387 futures contracts on April 16 after they had been net long by 37,037 the prior week. The turnaround was due to both long liquidation, as reflected by a 21,721 decline in total longs, and fresh selling, reflected by a 30,703 increase in total shorts.

“Strong data in the U.S., growing signs of a turnaround in China, and a heightened ‘melt-up’ rhetoric for stocks saw the market cast the yellow metal to the side,” said TD Securities.

“The S&P 500 topped the 2,900 level for the first time since the October collapse, while interest rates and the USD [U.S. dollar] churned higher as the market started to price out previously anticipated cuts. In the short term, these dynamics will likely keep a cap on gold, but as U.S. growth slows and volatility increases, shifting asset allocations could be the next major upside catalyst.”

George Gero, managing director with RBC Wealth Management, said interest in gold futures has been cooled by a U.S. dollar index trading up around 97, as well as the stronger tone in equities lately. International investors must buy the dollar to participate in the stock-market rally, he pointed out.

“It’s really all about the dollar,” he said.

Meanwhile, in silver, the funds increased their net-short position to 10,928 contracts from a net short of 2,532 the week before. This was due to fresh selling, as the 8,823-lot increase in gross shorts outpaced the 427 increase in total longs.

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