Hedge funds shedding bullish gold bets as yields rise to one-year high
(Kitco News) - Gold prices are starting the week on solid footing as prices push above $1,800 an ounce. However, analysts are warning investors that the market is still at risk as hedge funds continue to shed their bullish bets and increase their bearish outlook, according to the latest trading data from the Commodity Futures Trading Commission (CFTC).
Analysts note that gold's bullish speculative interest fell to its lowest level in 15 months as prices pushed to a seven-month low. The selling interest also came as U.S. bond yields rose to their highest level in nearly a year.
CFTC disaggregated Commitments of Traders report for the week ending Feb. 16 showed money managers decreased their speculative gross long positions in Comex gold futures by 8,736 contracts to 125,997. At the same time, short positions rose by 10,948 contracts to 58,041.
Gold's net length dropped to 67,956 contracts, down more than 20% from the previous weeks. During the survey period, gold prices fell below $1,800 an ounce.
"The bearish mood, with both long liquidation and short building, was driven by several incidents. First, the UST 10y yield increased to 1.314% on Feb. 16 at close, the highest level since February 2020, right before the pandemic hit. Second, there is growing optimism surrounding the economy given President Biden's $1.9trn stimulus plan and the vaccination rollout," said analysts at Societe Generale in a report Monday.
According to some analysts, gold's net length still poses a threat to prices. Last week TD Securities said that it was stopped out of its long gold position as prices fell below $1,790 an ounce.
"Investors continued to shed length in gold, liquidating longs and adding shorts as key trends were broken amid a continued steepening in the yield curve and increasing real rates," said the TD analysts.
Hedge funds are liquidating their gold position, but the data shows that they are holding firm on their bullish silver bets.
The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 1,818 contracts to 63,102. At the same time, short positions increased by 499 contracts to 24,338. Silver's net length currently stands at 38,764 contracts, up 3.5% from the previous week.
Silver prices held steady above $27 an ounce during the survey period with a brief spike above $28 an ounce.
Analysts remain bullish on silver. There are expectations that the grey metal will continue to outperform gold prices amid more robust industrial demand due to an improving outlook for the global economy.