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Hedge funds remain bullish on gold, but momentum is starting to ebb

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(Kitco News) - Hedge funds and money managers continue to increase their speculative bullish gold bets, but according to some analysts, the latest trade data from the Commodity Futures Trading Commission (CFTC) shows momentum is slowing.

Some analysts have noted that some technical indicators show gold was overbought after pushing above $1,900 an ounce. The analysts have added that consolidation at the current level would be healthy for the precious metal's long-term uptrend.

"The market is looking stable in a strong uptrend," said Kevin Grady president of Phoenix Futures and Options.

The CFTC disaggregated Commitments of Traders report, for the week ending June 1, showed money managers increased their speculative gross long positions in Comex gold futures by 3,408 contracts to 147,270. At the same time, short positions rose by 690 contracts to 37,297.

Speculative interest in gold has risen for five consecutive weeks. Gold's net length currently stands at 109,973 contracts, up nearly 2.5% from the previous week.

During the survey period, gold prices managed to push above and briefly turn positive for the year.

Ole Hansen, head of commodity strategy at Saxo Bank, said that this past week's buying is significantly lower compared to the activity seen in April and May.

"Having surged higher by $240 since early April on a combination of technical buying and short-covering from large trend-following funds, the lack of fresh buying last week could indicate that this initial demand has now been met," he said.

Commodity analysts at TD Securities are also warning investors of slowing momentum in the gold market.

"We've noted that gold markets could be increasingly vulnerable to a pullback, as the slowdown in speculative flows, combined with weak physical demand from India and signs from Chinese onshore gold markets that import demand from the Middle Kingdom may weaken, all increased vulnerabilities for the bulls," the analysts said in a report Friday.

"A weak nonfarm payrolls print may have reinvigorated interest from money managers, putting a halt to the deepening pullback on Friday for the time being, but a continued rise in interest will be necessary to avoid a deeper pullback," they added.

Although hedge funds are still bullish on gold, bearish sentiment continues to grow in the silver market.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 2,509 contracts to 70,120. At the same time, short positions increased by 478 contracts to 29,441.

Silver's net length now stands at 40,679 contracts, down nearly 7% from the previous week.

During the survey period, prices continued to fluctuate and could not hold a brief push above $28.50 an ounce.

According to some analysts, silver continues to struggle as falling base metal prices highlight weakening industrial demand.

High-grade copper futures continued to test critical support around $4.50 per pound as hedge funds continued to add more bearish bets in the marketplace.

The disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures fell by 3,455 contracts to 67,542. At the same time, short positions rose by 2,825 contracts to 40,774.

Copper's net length currently stands at 26,768 contracts, down 19% from the previous week.

"Despite renewed supply concerns amid Beijing's increasing focus on decarbonization, which provided the red metal a jolt off recent lows, the easing demand momentum was enough to see traders keep their bearish tilt," said analysts at TD Securities.

Hansen noted that copper's net length is at its lowest point since June 2020.

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