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Hedge funds drop bullish gold bets at fastest pace in five months

Kitco News

(Kitco News) - Growing uncertainty in the gold market caused some hedge funds to reduce their bullish bets at their fastest pace in in six months, according to the latest trade data from the CFTC.

The CFTC's disaggregated Commitments of Traders (CFTC) report, for the week ending Oct. 1, showed money managers dropped their speculative gross long positions in Comex gold futures by 45,518 contracts to 219,990. At the same time, short bets rose by 1,542 contracts at 29,179. Gold's net-long positioning currently stands at 190,811 contracts, down 17% from the previous week.

Gold saw its biggest decline in its net length since April. During the survey period gold prices dropped more than 3%. The yellow metal fell to a two-month low as prices dropped below $1,500 an ounce.

Sean Lusk, co-director of commercial hedging at Walsh Trading, said that the long liquidation has taken some of the “froth” out of the marketplace.

“There are just too many longs in the marketplace,” he said. “I think we will see more trades leave the market as there is not a lot of news to really drive prices higher.”

However, other analyst have said that the market could on a more stable foundation as market jitters has prompted investor which a lack of conviction, also known as the weak hands, to leave the gold space.

Ole Hansen noted that general uncertainty in financial markets will continue to support the gold market, as prices have regain the $1,500 an ounce level after last week’s sharp selloff.  He added that although some hedge funds are reducing their bullish exposure to the precious metal, short bets have not increased significantly.

“The limited addition of fresh short positions point to lack of selling appetite despite the mentioned break,” he said.

But it wasn’t just gold, investors also shed some of their bullish bets for silver, albeit at a slower pace compared to the yellow metal.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 3,553 contracts to 73,193. At the same time, short positions increased by 1,178 contracts to 28,990. Silver's net length currently stands at 44,203 contracts, down 9% from the previous week.

During the survey period silver prices dropped more than 7% as prices pushed to $17 an ounce.

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