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Hedge funds still bearish on gold but sentiment is starting to shift

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(Kitco News) - Bearish bets continue to dominate the gold market even as some hedge funds retest some of the investment waters as the market looks for some support at a two-month low, according to the latest trade data from the Commodity Futures Trading Commission.

The CFTC disaggregated Commitments of Traders report, for the week ending June 29, showed money managers increase their speculative gross long positions in Comex gold futures by 5,400 contracts to 115,438. At the same time, short positions rose by 6,554 contracts to 54,056.

The gold market has seen its net length drop for four consecutive weeks and now stands at 61,382 contracts, down 3% from the previous week and is at its lowest level since early May.

During the survey period, gold prices tested critical support around $1,750 an ounce.

Although bearish bets continue to dominate gold's speculative market, some analysts say that sentiment is starting to shift, especially as goldgold prices look to push back above their 100-day moving average and test important resistance at $1,800 an ounce.

Ole Hansen, head of commodity strategy at Saxo Bank, said that the gold's growing bearish tilt creates a short-covering risk in the marketplace. He added that he is watching $1,814 an ounce and a move past that level could trigger a potential short squeeze.

Analysts at TD Securities also said they see the potential for renewed bullish momentum in the gold market.

"With money managers growing longs, albeit modestly, not all positioning was betting on a decline amid technical and macro factors. Indeed, those who bet long ended up being correct due to a continued slide in Treasury yields and concerns that the Delta variant may slow growth. At the end of the week, gold jumped to $1,788/oz as the market judged the June payrolls data to be conducive to easy monetary policy for a prolonged time, and as yields plunged," the analysts said.

TD Securities added that they are watching gold's 100-day moving average.

Sentiment in the silver market also appears to be turning bullish as hedge funds covered their bearish bets as the metal managed to hold support above $25.50 an ounce.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 559 contracts to 72,624. At the same time, short positions dropped by 2,763

contracts to 24,076.

Silver's net length increased to 32,854 contracts, up 11% from the previous week, which represented a 2-month low. During the survey period, silver prices pushed back above $26 an ounce.

According to some analysts, silver is benefiting from renewed interest in base metals as copper prices hold support above $4.20 per pound.

Copper also attracted some bullish attention last week, for the first time in seven weeks.

The disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures rose by 1,483 contracts to 58,756. At the same time, short positions fell by 6,688

contracts to 32,750.

Copper's net length increased 26,006 contracts, up nearly 46% from the previous week.

However, some analysts are not optimistic that copper prices will be able to hold the current sentiment.

"Moving forward, the combination of a weakening Chinese credit impulse and US fiscal drag, along with global PMIs rolling over, spells bad news for commodity demand growth. At the same time, supply disruptions are offering less support as China sells metal from their strategic reserve, and as smelters finalize deals for higher TCs, which suggest supply of concentrate is more readily available," said analysts at TD Securities.

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