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Money Managers Favor Silver Over Gold Futures

Kitco News

(Kitco News) - Fund managers favored silver over gold during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC), analysts said.

Bullish positioning in gold futures dipped by 1%, while that for silver rose by 79%. However, prices rose in both metals, and the next round of data on Friday are likely to show that speculators upped their bullish positioning in each since prices have risen sharply since the July 16 cut-off for the current CFTC report, observers said.

During the week-long period to July 16 covered by the data, Comex August gold rose $10.70 to $1,411.20 an ounce, and September silver added 53.1 cents to $15.678. Around 10 a.m. EDT on Monday, August gold had risen further to $1,429.50 an ounce, while September silver was at $16.405.

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 trimmed their net long in gold slightly to 180,059 futures contracts from 182,611 the prior week and 194,087 the week before that. This occurred as the amount of fresh selling (increase of 5,573 gross shorts) slightly outpaced the amount of fresh buying (total longs rose by 3,021 lots).

However, the market then got dovish comments from New York Fed President John Williams and Fed Vice Chair Richard Clarida, suggesting the Fed should be proactive with rate cuts, TDS said. This “likely fueled further gold buying later in the week, although with Fed cuts baked into the cake, spec length likely ran into profit-taking near the upper bound of the range at $1,4,40/oz.”

Meanwhile, in silver futures, money managers’ net long jumped sharply to 27,764 futures contracts from 15,527 the prior week. The bulk of this was buying that came in the form of short covering, as the number of total short positions fell by 9,584. Gross longs rose by 2,653.

Besides the jump in bullish positioning for silver in CFTC data, Commerzbank analysts pointed out that there has also been a bigger increase in silver holdings than gold by global exchange-traded funds. Last week, silver holdings having been topped up by 450 tonnes, or 2.7%, while gold holdings rose by 28 tonnes, or 1.2%, the bank said.

Speculative financial investors were “betting heavily on rising silver prices of late, while continuing to moderately square long positions in gold,” Commerzbank said. In fact, silver bullish positioning is now at the highest level in nearly five months.

“Net long positions are probably even considerably higher by now given that the current statistics show only a small part of the sharp increase in the silver price and the price has risen noticeably further since the reporting date,” Commerzbank said.

“However, this also means that the upswing has been driven to a large extent by speculation, putting it on shaky ground in our eyes. After rising from below $15 to over $16.50 in just 2½ weeks, we would not be surprised if some market participants were to take profits, thereby prompting a price correction,” the bank noted

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