Speculators Cut Long Palladium Positions In CFTC Report

16 August 2010, 12:50 p.m.
By Debbie Carlson
Of Kitco News

Chicago -- (Kitco News) -- Speculative traders cut their exposure to palladium futures long positions according to U.S. government data as prices for the white metal spiraled down during the reporting period.

The Commodity Futures Trading Commission’s weekly commitment of traders data for the week ending Aug. 10 showed speculators cut their long positions in palladium futures on the New York Mercantile Exchange. In the legacy futures-only reports, the non-commercials cut longs by 1,991 contracts and are now net long 12,345 contracts. Similarly, in the disaggregated futures and options combined, managed-money traders cut longs by 1,685 contracts and are net long 9,868 contracts.

Calling this a “relatively strong reduction in net long positions” Commerzbank said in a research note “this explains why palladium prices fell by over 5% from the 10-week high in the same period.”

During the reporting period, which stretched from Aug. 4 to Aug. 10, most-active September futures prices fell from a settlement on Aug. 4 of $500.15 and ounce to $470.60 on Aug. 10. For the rest of last week, prices crept up, to settle Friday at $477.25

Barclays Capital attributed the drop in prices and fund net length to long liquidation. “Investors took profit in PGMs following palladium prices testing over two-month highs,” the bank said Monday.

The futures-only category noted commercials were net short 14,187 contracts, having cut shorts by 1,223 and increased longs by 473 contracts. In the disaggregated futures and options combined, swap dealers are net short 4,029 contracts and the producer category shows they are net short 10,158 contracts.

There was little change in the gold category of the CFTC report, considering the size of open interest. Managed-money firms cut shorts by 2,326 and added 377 longs and are net long 161,122 contracts. Swap dealers are net short 89,426 contracts, having adding 6,584 short contracts and producers are net short 159,775 contracts. Futures-only non-commercials are net long 190,687 and commercials are net short 230,980.

The modest rise in positions by speculators may have a result of short covering, rather than fresh longs, said Barclays.

With the return of prices over $1,200, Commerzbank said the jewelry-type buyers who were evident when gold prices were lower are no longer there. In fact, the bank said: “After stronger physical gold buying was evident at prices below $1,200 a troy ounce, selling can now be observed again at the current higher price level, especially in Asia.”

Monday gold prices are up again, supported by investors seeking safe haven and some asset allocation-type buying that has returned to commodities in general.

In other precious metals CFTC data, the managed-money category for platinum was little changed at net long 16,499 contracts. Swap dealers are net short 7,399 contracts and producers are also net short 12,623 contracts. In silver, the managed-money category was little changed follow the previous week’s big jump in long positions. Those firms cut 217 long contracts for a net long position of 28,255. Swap dealers are net short 1,107 contracts and producers are net short 52,303 contracts.

In base metals, managed-money firms are adding to copper positions, even as prices started to top out and turn weaker. However, the reporting time frame does not include most of the swift drop in prices last week. Managed-money firms added 2,420 contracts and are net-long 20,758 contracts. Swap dealers added a modest 112 longs and are net-long 45,544 positions while producers are short 59,707, having added 6,327 shorts.

From Aug 4 to Aug. 10, Comex copper prices fell 9.2 cents, ending at $3.3125 a pound on Aug. 10. Those losses continued, with the September contract settling at $3.2520 a pound on Friday.

The break in prices could represent a buying opportunity for copper, Commerzbank said, as the red metal is being well-supported by speculators. The bank said looking at futures-only non-commercial positions are at their highest level since the end of April for the third consecutive week. “However, should they turn their back on the copper market again, this would mean high setback potential,” the bank cautioned.

To see the full CFTC report, go to http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

By Debbie Carlson, contributing to Kitco News;dcarlson@kitco.com

Editor’s Note: Meet the Kitco News Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.