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Analysts look for funds to start building bullish futures positioning in gold

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(Kitco News) - The net-bullish positioning of money managers in gold futures was nearly flat during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC), but analysts said they look for fund enthusiasm to pick up.

The CFTC’s “disaggregated” report showed that money managers’ net-long position in gold as of April 7 was 152,482 futures contracts, not much change from 152,598 the week before. The figure reflects the difference between the total number of bullish (long) and bearish (short) contracts, with a net-long meaning more bulls than bears.

Phil Flynn, senior market analyst with at Price Futures Group, said he anticipates that funds will start returning to the long side of the market now that the Easter holiday is out of the way and money managers focus on all of the fiscal and monetary stimulus to prop up the economy and market, which he described as supportive for gold.

“We would expect the funds to return as people get back from their holiday,” Flynn said. “I think you’ll see the long side start to accumulate.”

The net long has been fairly constant for about a month now. It fell from 238,546 as of Feb. 18 to 154,079 as of March 17, then has been in a narrow range of 154,079 to 157,409 since.

George Gero, managing director with RBC Wealth Management, also said he looks for increased fund interest in the long side of the market.

“I expect much more volatility,” Gero said. “But I expect the volatility in gold to take place at higher and higher prices.”

He attributed the volatility to knee-jerk reactions in a market fixated on the most recent headlines.

Gold prices rose sharply during the last CFTC reporting week, even though the futures positioning was flat. During the week-long period to April 7 covered by the last CFTC report, June gold rose $87.10 to $1,683.70 an ounce, while May silver rose $1.324 to $15.48.

Gero pointed out that gold has been driven by other types of investment flows lately, particularly exchange-traded funds, even when the overall participation in the futures market lagged.

“I think you’re still seeing reluctance in the futures market that you’re not seeing in the long-term investment market,” he said.

The World Gold Council reported last week that first-quarter ETF holdings rose by 298 metric tons, the most since 2016, with 151 of those tons coming during March. Those holdings rose by another 40 tons during the first several business days in March, hitting a record total of 3,225, Standard Chartered reported on Thursday.

Meanwhile, money managers trimmed their their net-bullish stance in silver to a net long of 16,622 futures contracts from 17,974 futures the week before. The bulk of the change was due to fresh selling, as gross shorts rose by 1,294 lots.

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