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Money managers slightly trim bullish gold positioning

Kitco News

(Kitco News) - Large speculators reduced their net-bullish positioning in gold futures modestly for the second week in a row, based on data compiled for the most recent reporting week for the Commodity Futures Trading Commission (CFTC).

Still, the market’s stance remains bullish overall, with gold continuing to draw safe-haven flows due to worries about how China’s coronavirus could impact the global economy, analysts said.

During the week-long period to Jan. 28 covered by the last CFTC report, Comex April gold rose by $11.70 to $1,575.80 an ounce, while March silver fell 35 cents to $17.458.

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. 28, money managers’ net-long position slipped to 219,938 futures contracts from 223,832 the week before. The decline was due to long liquidation, as the number of gross long positions fell by 4,010 and far outpaced a decline of 116 short positions (short covering).

Commerabank said “speculative financial investors took profits in the week to 28 January and slightly reduced their net-long positions.”

Still, analysts pointed out that the metal overall has continued to draw investment demand. Commerzbank noted that gold holdings by exchange-traded funds rose by 22 tons last week.

TD Securities, in a research note on the CFTC data, said that “safe-haven demand saw additional capital flow to the yellow metal amid surging fears that the Wuhan coronavirus may spread and derail the global reflationary wave.”

“While net positioning remains at extreme levels, per-trader positioning has largely remained in balance with expectations, suggesting that the more sustainable underlying driver of investment demand — namely, the need to protect capital from negative real rates — may keep appetite for precious metals on the rise, as per-trader positioning decreases the risk of a rush-to-the-exits.”

In silver, money managers’ net-long position came in at 47,967 futures contracts, down from 56,558 the week before. There was both long liquidation (decline of 5,635 gross long positions) and fresh selling (increase of 2,956 shorts).

 

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