Make Kitco Your Homepage

Money managers' bullish gold positioning at lowest level since June

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) -  Money managers slashed their net-bullish positioning in gold futures to the lowest level since last summer during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC).

Analysts said last week that they expected this decline since many traders have had to liquidate positions to raise cash or offset losses in other markets as so-called risk assets plunged amid the COVID-19 outbreak. Selling in gold was exacerbated when pre-placed sell stops were triggered at certain points.

“Money managers aggressively cut their long gold exposure, as massive equity-market declines forced the liquidation of assets to cover margin calls and to cover redemptions,” said a research note from TD Securities.

Commerzbank analyst Carsten Fritsch pointed out that the net-bullish positions of fund managers are at their lowest level since last June. This positioning could have fallen even further. Prices fell from the cut-off of the last CFTC report on March 17 to early Monday, before bouncing after another monetary-policy announcement from the Federal Reserve to prop up the economy.

During the week-long period to March 17 covered by the last CFTC report, April gold tumbled by $134.50 to $1,525.80 an ounce, while May silver lost $4.46 to $12.495.

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 to 154,079 futures contracts from 210,185 the week before. The net length is now down by 35% from 238,546 lots a few weeks ago.

The bulk of the selling in gold futures appeared to be long liquidation, as gross longs fell by 55,663 lots. There was a small increase of 443 total longs.

“The CFTC’s latest figures for speculative market positioning confirm that the price slide up to mid-month was largely due to forced selling,” Fritsch said.

Besides liquidating in gold due to sharp declines in equities, TDS pointed out that volatility in the gold market may have contributed to some traders opting to exit in precious metals.

“Once the financial system stabilizes in response to pending massive fiscal-stabilization policy, the addition unprecedented central-bank liquidity and less uncertainty, money mangers are likely to feel comfortable to grow long exposure,” TDS said.

Money managers trimmed their their bullish stance in silver to a net long of 21,938 futures contracts from 26,746 the week before. The decline was more modest than gold as bulls and bears alike were getting out of the market. Bulls liquidated to the tune of 15,549 positions, while gross shorts fell by 10,741 as bears bought to offset and exit from these trades.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.