Is gold's short squeeze over as hedge funds reluctant to make major bullish bets?
However, some analysts also note that the latest data from the Commodity Futures Trading Commission shows that money managers are reluctant to make any significant bullish bets.
"Despite the narrative suggesting that inflation will be under control soon with rates peaking early and at relatively low levels, there were very few long positions taken out by specs. With gold continuing to move past $1,800/oz on Friday, it is likely that specs continued to cover short exposure," said commodity analysts at TD Securities. "But given strong messaging coming from Fed officials that a pivot to a more dovish policy stance is unlikely until there is strong evidence that inflation pressures are diminishing, it seems that specs will be unwilling to take on new large long exposure which is needed to support a sustained price rally."
The CFTC disaggregated Commitments of Traders report for the week ending Aug. 9 showed money managers increased their speculative gross long positions in Comex gold futures by 3,379 contracts to 100,013. At the same time, short positions fell by 21,500 contracts to 59,279.
Gold's net length now stands at 40,734 contracts, more than doubling from the previous week. During the survey period, gold prices managed to push above $1,800 an ounce but were not able to break any major resistance levels.
Some analysts have said that gold's short squeeze could have run its course as markets still see a chance that the Federal Reserve will raise interest rates by another 75 basis points in September.
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In a comment on Twitter, John Reade, chief market strategist at the World Gold Council, said that although most of the movement in gold was due to short covering, gold is once again gaining some attention.
Commodity analysts at Société Générale noted that the jump in gold's bullish positioning shows that investors still see the precious metal as an important safe-haven asset.
"One interruption of the bullish response from precious metals centers on concerns that higher interest rates designed to fight inflation will harm economic growth, in turn increasing demand for gold," the analysts said.
The silver market is also benefiting from a short squeeze; however, investors appear to be reducing their overall exposure to the precious metal as bullish bets have also been pared back.
The disaggregated report showed that money-managed speculative gross long positions in Comex silver futures dropped by 558 contracts to 32,469. At the same time, short positions fell by 2,871 contracts to 39,012.
Silver's positioning remains net short by 6,543 contracts. During the survey period, silver prices pushed above $20 an ounce but were unable to test resistance at $21.
Although silver prices have been outperforming gold in recent weeks, many analysts remain bearish on the precious metal. Analysts note that a potential global recession could weaken industrial demand for silver.
Recession fears can be seen in speculative positioning in other base metals, specifically copper, which has been unable to attract significant bullish attention.
Copper's disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures fell by 950 contracts to 37,345. At the same time, short positions rose by 718 contracts to 57,179.
Positioning in the copper market remains solidly bearish with a new net short position of 19,834 contracts. Analysts have said sentiment appears to be flat as prices trade around $3.50 an ounce.
"We continue to anticipate weaker growth dynamics globally will ultimately weigh on the red metal and keep speculative appetite under wraps," analysts at TDS said.