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Hedge funds increase their bearish bets on gold as Fed plans aggressive rate hikes

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(Kitco News) - Gold's inability to break above $2,000 an ounce early last week prompted some hedge funds to ditch their bullish bets and add new short positions, according to some analysts looking at the latest trade data from the Commodity Futures Trading Commission.

Along with the technical selling pressure, some analysts note that aggressive monetary policy tightening expected from the Federal Reserve has pushed the U.S. dollar and bond yields to multi-year highs.

"The growing expectation that the U.S. Federal Reserve will lift rates by at least 50bps in May and likely another 50bps in June, in response to sky-high inflation and an above-potential economy, prompted money managers to aggressively cut gold length," commodity analysts at TD Securities.

The CFTC disaggregated Commitments of Traders report for the week ending April 19 showed money managers lowered their speculative gross long positions in Comex gold futures by 7,684 contracts to 157,560. At the same time, short positions rose by only 8,075 contracts to 56,294.

Gold's net length now stands at 101,266 contracts, down 13% from the previous week. After failing to break $2,000 an ounce, gold prices dropped to support at $1,950 an ounce. Since then, gold prices have continued to struggle and have fallen below $1,900 an ounce Monday.

While the sentiment is turning bearish on gold, there appears to be a more neutral stance in the silver market.

The disaggregated report showed that money-managed speculative gross long positions in Comex silver futures rose by 2,368 contracts to 57,303. At the same time, short positions fell by 3,730 contracts to 16,585.

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Silver's net length stands at 40,718 contracts, relatively unchanged from the previous week. During the survey period, silver prices pushed above $26 an ounce but were hit with some solid selling pressure and ended up testing support just above $25 an ounce.

Silver prices have continued to lose ground and have fallen below $24 an ounce, losing more than 2% Monday.

According to some analysts, silver prices struggle as global economic fears weigh on the precious metal's industrial demand outlook.

Among industrial metals, copper is struggling to attract bullish momentum as hedge funds continue to increase their bearish bets.

Copper's disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures increased by only 483 contracts to 69,111. At the same time, short positions fell by 3,781 contracts to 45,022.

Copper's net length is at 24,089 contracts, down 12% from the previous week. During the survey period, copper prices managed to push above $4.80 per pound, but could not hold their gains.

"Copper speculators continued to add to their longs, but added even more shorts amid a growing state of anxiety surrounding Chinese demand, as the nation sticks to its strictest lockdowns since the spring of 2020 and an aggressive hiking path at the Fed," said analysts at T.D. Securities. "Cyclical headwinds may also soon morph into tailwinds in China, with ambitious growth targets hinting at substantial stimulus on the horizon. Further, idiosyncratic risks to copper mining supply continue to rise, with Peruvian output particularly disrupted, raising risks of a more imminent tightening. In turn, copper prices may instead be coiling, before challenging new highs."

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