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Funds Increase Net-Bearish Positioning In Gold, Silver

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(Kitco News) - Large speculators became even more pessimistic about gold and silver during the most recent reporting week for data compiled by the Commodity Futures Trading Commission, increasing their net-short position in both metals.

During the week-long period to April 23 covered by the data, Comex June gold slipped by $4 to $1,273.20 an ounce, while May silver lost 12.4 cents to $14.791.

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.

“Financial investors do not seem to have much faith in gold as yet,” said a research note from Commerzbank. “ETF [exchange-traded-fund] investors sold 14 tonnes of gold last week, putting holdings in the gold ETFs tracked by Bloomberg below their start-of-year level. Speculative financial investors have greatly stepped up their bets on falling prices.”

In fact, analysts pointed out, the net-short position of money managers more than doubled from the prior week. The CFTC’s disaggregated report showed that these accounts stood net short by 33,829 futures contracts as of April 23. They had flipped to a net short of 15,387 lots on April 16 after having been net long by 37,037 the prior week.

“Speculators continued to lighten their [bullish] exposure to gold last week as strong earnings from tech behemoths saw the positive narrative in equities continue…,” said TD Securities. Further, analysts said, a technical breakout in the U.S. dollar and turmoil in emerging-market currencies also pushed the precious metal to its lowest level since December.

“But, rates continue to churn lower and Fed pricing saw interest-rate-cut probabilities for 2019 increase, despite the melt-up in equities, which helped to support gold,” TDS added. And, analysts added, there are now “a number of underweight bulls with plenty of dry powder as the narrative begins to shift.”

The increase in the gold bearish positioning during the most recent week was due to a combination of fresh selling (gross shorts rose by 11,235 lots) and long liquidation (total longs fell by 7,207).

“Speculative financial investors are also highly pessimistic about silver,” Commerzbank said.

Money managers increased their net-short position in silver to 17,539 futures contracts from 10,928 the week before. This was mostly due to fresh selling, with a 6,288-lot increase in gross shorts. Total longs fell by 323 lots.

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