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Funds trim bullish gold positioning; bigger decline expected as prices fall

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(Kitco News) - Money managers’ net-bullish positioning in gold futures fell modestly during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC). But the next round of statistics may well show a bigger drop since prices are tumbling, analysts said.

The CFTC compiles positioning data by trader categories as of each Tuesday and releases the information late on Friday afternoons.

The most active Comex April gold-futures contract rose during the first two days of the most recent CFTC reporting period. However, prices have been sliding ever since spot metal hit a seven-year high at the beginning of last week.

“Down by 8.6%, gold chalked up its biggest weekly loss since 2011 last week,” said Commerzbank analyst Daniel Briesemann. “We still attribute this to selling by speculative financial investors needing to meet margins calls on other markets. This is not yet evident in the CFTC data published on Friday because the price slide ensued only after the reporting date last Tuesday.”

Phil Flynn, senior market analyst with at Price Futures Group, also hinted that bullish positioning likely has declined further.

“You’re seeing a lot of liquidation,” he said. “When you have a move down $50, people are going to get out.”

As of 10:27 a.m. EDT Monday, Comex April gold was down $40.40 to $1,476.30 an ounce and earlier traded down to $1,450.90. This came after a loss of $73.60 on Friday.

As for the week-long period to March 10 covered by the last CFTC report, April gold rose by $15.90 to $1,660.30 an ounce, while May silver lost 23.3 cents to $16.955.

Net long or short positioning in 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 CFTC’s “disaggregated” report showed that money managers trimmed their net-long position modestly to 210,185 futures contracts from 215,361 futures the week before. They had been as high as from 238,546 lots a few weeks ago.

Longs and shorts alike were pulling out of the market. The decline in net length during the most recent reporting week came as the long liquidation (gross longs fell by 22,279 lots) exceeded the short covering (total shorts fell by 17,103)

Money managers trimmed their their bullish stance in silver to a net long of 26,746 futures contracts from 28,971 the week before. As was the case in gold, there was an exodus by bulls and bears alike. Total longs fell by 4,948 lots, while gross shorts fell by 2,723 lots.

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