Money managers trim bullish gold positioning amid rise in equities
(Kitco News) - Strong equities prompted money managers to scale back their net-bullish positioning in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC).
As stocks rose, investors both took profits on bullish gold positions and may have been less inclined to move into the metal as a safe haven, analysts said.
During the week to May 26, covered by the most recent CFTC data, Comex August gold fell $29.70 to $1,728.20 an ounce, while July silver lost 30.6 cents to $17.595.
Since, however, bullish positioning may have built again, with both metals higher since the cut-off date for the last CFTC report. As of 9:25 a.m. EDT, August gold was at $1,742.60 an ounce, while July silver was at $18.56. In fact, TD Securities commented that once “the dust settles, capital will seek gold's warm embrace as it attempts to shelter itself from a prolonged period of negative real rates.”
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 fell to 113,081 futures contracts as of May 26 from 127,064 the week before. The decline was due to a combination of long liquidation, as reflected by an 8,395 fall in gross shorts, as well as fresh selling, as shown by a 5,588 increase in total shorts.
“Gold bugs aggressively shed longs and added some shorts...amid a sharp rally in risk assets,” said a research note from TD Securities. “While the monetary explosion is certainly a positive behind the bullish gold narrative, the swarm of central-bank liquidity has also helped risk assets firm sharply, which in turn is placing a cloud over gold's luster.”
Sean Lusk, co-director of commercial hedging with Walsh Trading, cited not only the strength in stocks but gold’s inability to break through chart resistance as factors that led to a pullback in net-long positioning of gold traders.
“We had a breakout to the upside in stocks going into the long [Memorial Day] holiday weekend,” he said. “We had some profit-taking [in gold]. And it perhaps relieved some safe-haven demand coming into the market.”
Some market participants also may have exited ahead of first-notice day for the June futures.
Still, Lusk said, after gold’s price dip, traders hopped back into the market as buyers.
Meanwhile, money managers’ net-long position in silver rose to 26,107 futures contracts from 21,466 in the prior week. This was the result of both fresh buying (total longs rose by 3,212 lots) and short covering (gross shorts fell by 1,429).