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Money Managers Still Hiking Bullish Posture In Gold

Kitco News

(Kitco News) - Money managers continued to build their bullish positioning in gold futures, despite volatility in prices during the most recent reporting week for positioning data compiled by the Commodity Futures Trading Commission.

Traders for the most part stayed with gold, with the U.S. Federal Reserve having hinted that an imminent rate cut is on the horizon, said TD Securities.

“Money managers opted to further increase their length in response to falling yields, which have seen the negative-yielding debt pile break a record, sitting north of $13T [$13 trillion],” TDS said.

Nevertheless, there was volatility in prices during the week-long period to July 2 covered by the CFTC data. Comex August gold fell from a high of $1,442.90 on June 25, the date of the prior CFTC report, to a low of $1,384.70 on July 1. By the July 2 cut-off for the current report, however, gold was back to $1,408. For the reporting week, August gold fell $10.70 to $1,408 an ounce, while September silver lost 14.5 cents to $15.238.

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 upped their net long to 194,087 futures contracts from 177,741 the week before. There was both fresh buying (increase of 9,269 contracts) and short covering (decline of 7,078 shorts).

“At a good 194,000 contracts, net-long positions were at their highest level on this reporting date since January 2018,” said Commerzbank. “Thus more than 520 tonnes of gold were bought via the futures market in the space of five weeks.”

As a result, analysts continued, “there was and still is considerable potential for profit-taking” in the precious metal.

“In any upward trend it is natural, and indeed almost ‘healthy,’ for profits to be taken in the interim,” Commerzbank said. “In view of the ultra-loose monetary policy pursued by many central banks and the numerous (geo)political risks, we expect gold to continue or resume its upswing.”

Meanwhile, in silver futures, money managers’ net long dipped to 21,923 futures contracts from 23,261 the prior week. The number of fresh bullish positions increased by 1,438, but this was exceeded by the new bearish ones as gross shorts rose by 2,776 lots.

“In contrast to gold, silver has not seen speculative financial investors further increase their net-long positions; in fact, they have reduced them slightly,” Commerzbank said. “This explains at least in part why the silver price has not picked up in tandem with the gold price and why the gold/silver ratio had climbed for a time to over 93.”

A rising number for the ratio reflects an underperformance of silver versus gold.

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