Gold market struggling with investor apathy as hedge funds reduce their bullish bets
(Kitco News) - Apathy in the gold market continues to grow as hedge funds liquidate their bullish bets, according to the latest trade data from the Commodity Futures Trading Commission (CFTC). The precious metal has been unable to hold gains above $1,835 an ounce.
Commodity analysts have noted that gold price has tested that critical resistance point four times since mid-July and has been unable to breakthrough. The lackluster interest in gold has helped to push prices back to support just below $1,800 an ounce.
In a Twitter post, John Reade, chief gold strategist at the World Gold Council, described the precious metal market as, "All a bit meh."
In a recent interview with Kitco News, Ole Hansen, head of commodity strategy at Saxo Bank, said that while investors continue to buy gold on dips below $1,800, there is no major impetus for investors to jump into gold. He added that speculative interest would pick up when there is solid momentum above $1,835 an ounce.
As to what will trigger a new move into gold, Hansen said he is watching the U.S. dollar for any signs of weakness.
"Unless 10-year nominal yields break above key resistance at 1.38%, thereby potentially causing a negative reaction, we believe the dollar will be the main short-term focus for gold traders," Hansen said in a separate report.
The CFTC disaggregated Commitments of Traders report for the week ending Aug. 24 showed money managers lowered their speculative gross long positions in Comex gold futures by 7,511 contracts to 1259,044. At the same time, short positions rose by 6,571 contracts to 61,449.
Gold's net length now stands at 67,595 contracts, down 17% from the previous week. During the last day of the survey period, gold prices saw significant selling pressure, falling below $1,800 an ounce.
"Despite a general trend of dropping rates, a somewhat weaker USD and firming prices over the prior week, money managers opted to aggressively reduced their long gold exposure and grow short positioning. It seems specs are anticipating higher real rates and less capital to flow into the yellow metal, as the Fed prepares to start tapering its aggressive asset purchasing program," said commodity analyst at TD Securities.
The silver market is fairing a little better than gold as hedge funds cover their bearish bets; however, they are still reluctant to make any significant bullish bets.
The disaggregated report showed that money-managed speculative gross long positions in Comex silver futures increased by 398 contracts to 49,406. At the same time, short positions dropped by 5,105 contracts to 31,630.
Silver's net length stands at 17,776 contracts, up 44% from the previous week. During the survey period, silver prices push to a one-month high. However, since then, the price has been unable to hold those gains is well below $24 an ounce.
Although silver is struggling to attract bullish momentum, many analysts think it has more potential than gold as industrial demand increases particularly, as demand for green energy grows.
Last week the U.S. Department of Energy said that the U.S. could get 37% of its power from solar energy by 2035. Solar energy could represent more than 40% of the market by 2050.
Currently, only 3% of the power generated in the U.S. comes from solar energy. Silver is a critical component in photovoltaic solar panels.
The general investor malaise can also be seen in the copper market as prices remain down from their record highs seen only four months ago.
The latest COT data shows investors reducing their overall exposure to copper.
Copper's disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures fell by 1,097 contracts to 57,092. At the same time, short positions fell by 910 contracts to 26,311.
"Speculative interest in copper has ground to a halt, with very few shorts covering and even fewer longs adding to their length last week," said commodity analysts at TD Securities.