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Money managers trim bullish positioning in gold futures

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(Kitco News) - Money managers decreased their net-bullish posture in gold futures during the most recent reporting week for data compiled compiled by the Commodity Futures Trading Commission (CFTC), but this low positioning also means potential buying should the metal rally, analysts said.

During the week to April 21 covered by the last CFTC report, Comex June gold fell $81.10 to $1,687.80 an ounce, while May silver lost $1.254 to $14.876.

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 ’net-long position in gold as of April 21 fell to 146,271 futures contracts from 155,244 the week before.

“Speculative interest is thus at its lowest level since June 2019, which likewise points to rising prices,” said Commerzbank analyst Carsten Fritsch. “After all, it is easy to imagine that speculators will still decide to jump on the bandwagon.”

Numerous analysts have called for gold prices to rise after massive fiscal stimulus and monetary accommodation around the world to combat the economic fallout from the COVID-19 pandemic. In the U.S. alone, 26.45 million million people have filed initial jobless claims in a five-week period.

The bulk of the decline was long liquidation, as the number of gross bullish positions fell by 6,920 lots. There was also some fresh selling, as gross shorts rose by 2,053.

The net long finally moved out of the narrow range of 154,079 to 157,409 lots that it had been contained within since March 17. Previously, it had been as high as 238,546 back on Feb. 18.

“Speculators decreased their gold length, as prices reached the top of the range and as concerns over a renewed round of financial deleveraging grew, catalyzed by the carnage in crude markets,” said a research note from TD Securities.

However, analysts said the positioning is now “far from stretched,” which suggests any further “dash for cash” is less of a risk to the precious metal. Gold previously tumbled in mid-March when the stock market was in a free fall as investors were selling a wide range of assets, including profitable gold positions, in order to raise liquidity.

“With that said, the unprecedented scale of QE [quantitative easing], along with clean positioning, and steady ETF [exchange-traded-fund] flows all suggest that the outlook for gold prices remains particularly strong…,” TDS said.

Meanwhile, money managers trimmed their their stance in silver to a net long of 13,791 futures contracts from 15,448 the week before. Total longs fell by 774 lots, while gross shorts increased by 883.

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.