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Money managers hike bullish gold positioning

Kitco News

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(Kitco News) - Large speculators rebuilt bullish positioning in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC).

During the week-long period to Dec. 17 covered by the report, Comex February gold gained $12.50 to $1,480.60 an ounce, while March silver added 37 cents to $17.072.

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 disaggregated report shows that in the week to Dec. 17, money managers’ net-long position rose to 201,721 futures contracts from 183,648 the week before. Most of the rise was fresh buying, as reflected by an increase of 15,687 gross long positions. There was also some short covering, as the number of gross shorts fell by 2,386.

Bullish positioning had fallen in the prior week, but prices bounced the day after the cutoff for the Dec. 10 data. Some analysts linked this to a Federal Reserve tone construed to still have a slightly dovish tilt after a Dec. 11 meeting, even though policyholders left interest rates unchanged.

Low rates are leading to expectations for rising inflation, said Phil Flynn, senior market analyst with at Price Futures Group. And some investors buy the precious metal as an inflation hedge.

“With central banks keeping interest rates low, we are seeing gold buying on expectations we will get more demand in the New Year,” Flynn said. “Some people are also using it as a hedge against a rising stock market.”

He explained that they also are looking at gold as a safety play in case stocks suddenly fall sharply from their recent record highs.

In the case of silver, money managers’ net-long position rose to 35,479 futures contracts from 29,212 in the prior week. This was due to both fresh buying (3,622 increase in gross longs) and short covering (decline of 2,645 total shorts).

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