Hedge Funds losing interest in gold as bond yields rise
Analysts note that although long-term fundamentals remain supportive for gold prices, rising nominal yields are taking their toll on gold investors as prices struggle to find consistent bullish momentum.
"Gold is facing some very considerable headwind in the current market environment," said Carsten Fritsch, precious metals analyst at Commerzbank, in a note Monday. "Investors have other favorites just now, as evidenced by stagnating speculative net long positions and recent pronounced outflows from the gold ETFs."
CFTC disaggregated Commitments of Traders report for the week ending Feb. 9 showed money managers decreased their speculative gross long positions in Comex gold futures by 2,329 contracts to 134,733. At the same time, short positions fell by 2,191 contracts to 47,093.
Gold's net length currently stands at 87,640 contracts, relatively unchanged from the previous week.
"Gold's inability to respond to outside market developments saw both long and short positions reduced, thereby leaving the net unchanged and near a 20-month low," said Ole Hansen, head of commodity strategy at Saxo Bank, in a research note.
Gold prices managed to push to a one-week high during the survey period; however, the market did not have enough buying momentum to hold above critical resistance above $1,850 an ounce.
Commodity analysts at TD Securities despite sentiment in the gold market as "complacent."
"With the Fed's passive approach to containing a steeper yield curve, real rates were being driven by nominal rates rather than inflation expectations, leaving gold bugs vulnerable," he said.
However, the bank added that gold holding supporting above $1,800 an ounce is a sign of resilient strength, even if it will take a little longer for the precious metal to push higher.
"While the market is on stronger footing, we are not anticipating a bull run just yet, as price action in global markets remains nowhere near testing the Fed's resilience, suggesting the yield curve could remain on a steepening path while investment flows remain capped for the time being," the analysts said.
As investors cool on gold, the silver market continues to feels the effects of the recently failed retail-induced short squeeze.
The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 215 contracts to 61,284. At the same time, short positions rose by 1,408 contracts to 23,839. Silver's net length currently stands at 37,445 contracts, down 3% from the previous week.
Silver prices were relatively stable, trading below $28 an ounce during the survey period.