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Funds Increase Bullish Gold Positioning, Pessimistic Toward Silver

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(Kitco News) - If you don’t like the gold market, just wait a week.

Large speculators moved back into gold during the last reporting week for positioning data compiled by the Commodity Futures Trading Commission, although these accounts remained pessimistic toward most of the metals with more industrial characteristics, including silver, analysts said Monday.

This continued a back-and-forth trend in the market prior to the breakout higher that occurred at the end of last week. Previously, gold had been range-bound, with speculators buying into dips but selling rallies.

During the week-long period to May 28 that was covered by the CFTC report, Comex August gold rose by $3.90 to $1,277.10 an ounce, while July silver slipped 9 cents to $14.32.

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 in 2009 and meant to offer more detail.

The latest round of CFTC data show that “speculators increased their net-long positions in gold while conversely increasing bearish positions on both silver and copper on fresh concerns regarding the global industrial economy,” said a research note from BMO Capital Markets.

TD Securities issued a similar sentiment.

“Positioning across precious metals continues to diverge, with speculators starting to take a shining to gold, as the call for rate cuts grow and surge in CTA [commodity trading adviser] buying kicks off amid increasingly positive momentum indicators,” TDS said. “On the other hand, silver and platinum have been feeling the weight of their industrial characteristics, as global growth concerns saw shorts pile into the industrial precious metals.”

Money managers’ net-long position in gold futures rose to 26,274 contracts from 15,937 the week before. More than half of the increase was due to short covering, as the number of total shorts fell by 6,009 lots. There was also some fresh buying, as reflected by an increase of 4,328 gross longs.

Meanwhile, in silver, money managers’ net-short position increased to 38,007 lots from 29,431 the week before. Fresh selling continued, as reflected by a 5,932 rise in gross shorts. There was also long liquidation, with the number of total bullish positions declining by 2,644 lots.

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