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Gold Rally Chased By Money Managers

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(Kitco News) - Large speculators sharply hiked their bullish positioning in gold futures for the fourth-straight reporting week, according to data compiled by the Commodity Futures Trading Commission.

During the week-long period to June 18 covered by the latest CFTC report, Comex August gold rose $19.50 to $1,350.70 an ounce. July silver gained 16.4 cents to $14.993.

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 disaggregated report shows that money managers once again upped their net long to 150,516 futures contracts from 129,160 the week before. The increase was due to fresh buying, as total longs climbed by 22,126 lots, far outpacing the 770 increase in gross shorts.

“In keeping with the recent trend, the expected dovishness ahead of the most recent FOMC [Federal Open Market Committee meeting] prompted money managers to once again aggressively grow their net gold exposure,” said TD Securities. “Money managers increased their long positions amid expectations that rate cuts are in the cards, as the market consensus priced in as many as three cuts this year, which boosted prices well above the $1,300 mark.”

However, given that bearish exposure is minimal and considering the speed of the rally, gold could very well consolidate its gains at “somewhat lower levels” before moving higher again, TDS continued.

“Positive U.S. data could be a trigger for a modest migration lower, but we ultimately see gold's shine on the horizon,” TDS said.

Analysts with Commerzbank pointed out that the net-long positioning is now likely to be even higher. This is because the metal has risen more than $50 since the cut-off date for the last CFTC data.

“Positioning in silver is net long again for the first time in three months,” Commerzbank said.

Net-bullish positioning in silver futures stands at 4,315 futures contracts, compared to a net short of 8,060 the prior week. The turnaround was due to a combination of fresh buying (total longs rose by 7,404 lots) and short covering (total shorts fell by 4,971).

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