Money Managers Eliminate Net-Bearish Position In Gold
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(Kitco News) - Large speculators wiped out their net-bearish positioning in gold futures – leaving them with a tiny net long -- during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC).
During the week-long period to April 30 covered by the data, Comex June gold rose by $12.50 to $1,285.70 an ounce, while July silver gained 11.9 cents to $14.984.
“The move returned the [gold] position to a net-long and highlights the continued struggle for direction with a rising dollar and stocks being countered by central-bank demand and a patient Federal Reserve,” said Ole Hansen, head of commodity strategy at Saxo Bank.
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 CFTC’s disaggregated report showed that these accounts stood net long by 76 gold-futures contracts as of April 23, compared to a net short of 33,829 futures contracts back on April 23. The big turnaround was mostly due to short covering, as reflected by a 27,735 decline in total bearish positions. Gross longs rose by 6,170 lots.
“Investors covered shorts and took on new longs despite a continued melt-up in U.S. equities as the dollar eased off the highs and U.S. data was mixed,” said a research note from TD Securities.
Market participants realized that a strong report on growth in gross domestic product was skewed by inventory builds, while the inflation portion of the report “disappointed,” TDS said. As a result, markets began to factor in rate-cut potential once again.
Now gold is likely to stay range-bound in the near term, TDS analysts added.
“According to the CFTC’s statistics, speculative financial investors completely reduced their net-short positions in gold in the week to 30 April, thereby contributing to the gold price upswing in the period under review,” Commerzbank said. “Thus 105 tonnes of gold were bought via the futures market. The price rise of a good $10 was relatively subdued given the extensive buying, however.
“By contrast, speculative financial investors remain pessimistic about silver; they have reduced their net-short positions only slightly, which at least partly explains the poorer performance of silver as compared with gold.”
Money managers remained net short in silver although they decreased their bearish positioning to 13,738 futures contracts in the week to April 30 from 17,539 the week before. This was the result of both fresh buying (total longs rose by 2,593 lots) and short covering (total shorts declined by 1,208).