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Money managers' bullish gold positioning remains elevated

Kitco News

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(Kitco News) - Large speculators did not hike their net-bullish positioning in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC), but the positioning remained elevated and left the market susceptible to profit-taking, analysts said.

The positioning declined but only marginally since the Dec. 31 report, which at the time was around a three-month high after rising 27% since Dec. 10, the last time the data showed a decline in net bullishness. Some profit-taking likely already set in since prices have declined from their roughly seven-year high hit early last week, observers said.

During the week-long period to Jan. 7 covered by the report, Comex February gold gained $51.20 to $1,574.30 an ounce, while March silver rose 47.2 cents to $18.393.

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 in the week to Jan. 7, money managers’ net-long position eased marginally to 229,757 futures contracts from 232,732 the week before. The decline was due to fresh selling, as the number of total short positions increased by 5,701. This more than offset the 2,726-lot increase in bullish positions.

“According to the CFTC’s statistics, speculative financial investors did not expand their net-long positions any further in the week to 7 January, but left them virtually unchanged at their high late-December level,” said Daniel Briesemann, analyst with Commerzbank. “It is precisely this high level of net-long positions that makes us see a risk of profit-taking, which could put pressure on the gold price.”

The situation for silver is similar, although “not quite as pronounced,” he said.

Gold began the year by surging sharply higher, with much of the rise coming on safe-haven buying due to geopolitical tensions. The U.S. killed Iranian General Qasem Soleimani in an air strike, and Iran retaliated by firing missiles at U.S. bases in Iraq, sending gold to its highest price in roughly seven years.

“But, as tensions cool and calmer heads prevail for now, prices have eased back into the $1,550/oz region and it is likely a portion of the excess length will need to be removed in the near term,” said TD Securities in a research note.

In the case of silver, money managers’ net-long position fell slightly to 57,014 futures contracts from 58,868 in the prior week. This occurred as the fresh selling (increase of 3,953 total shorts) outpaced the fresh buying (gross longs rose by 2,099).

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