Hedge Funds Continue To Pile Into Gold, Silver As USD Struggles
(Kitco News)- A weaker U.S. dollar and ongoing weak inflation concernscontinue to prompt hedge funds into gold, pushing prices to their highestlevels since September.
While gold futures saw its most substantial inflows sinceAugust last week, the U.S. dollar saw shorts increase to highest levels sinceAugust, according to Ole Hansen, head of commodity strategy at Saxo Bank. Headded that the U.S. dollar short positions against its G-10 peers are nowvalued at $9.2 billion.
The disaggregated Commitments of Traders report for theweek ending Jan. 9 showed money managers increasing their speculative grosslong positions in Comex gold futures by 47,692 contracts to 216,257. At thesame time, short bets fell by 184 contracts to 20,065. Gold’s net lengthincreased to 196,050 contracts.
Gold’s net length jumped by 32% from the previous week,which is its biggest increase in five, said Hansen.
During the survey period, gold prices were relativelyunchanged as prices held near a 3.5-month high.
“A flat yield curve and a weak jobs report, which revealedstill lackluster wage pressures, suggest the U.S. central bank may well beslower in raising rates than suggested by the dot plots. These factors,combined with dollar weakness, have prompted investors to bet on gold andsilver,” said Bart Melek, head of commodity strategy at TD Securities.
While gold’s momentum is strong, some analysts are warninginvestors that the market could be ripe for some profit-taking.
“At just shy of 200,000 contracts, their level is alreadyrelatively high now, which increases the risk of a correction,” said analystsat Commerzbank.
While some analysts are cautious on gold, optimism onsilver remains high with further room for gains after record buying in the lasttwo weeks.
The disaggregated report showed money-managed speculativegross long positions in Comex silver futures rose by 11,920 contracts to66,224. At the same time, short positions fell by 10,379 contracts to 28,122.Silver’s net length now stands at 38,102 contracts.
Just four weeks ago the silver market was net short.
“The swing of a good 52,000 contracts is equivalent topurchases of 8,150 tons of silver via the futures market. That said, the levelhere is not yet unusually high,” said analysts at Commerzbank.
While hedge funds piled into silver, the price struggledto hold a four-month gain as prices dropped more than 1% during the surveyperiod. However many analysts expect silver to eventually outperform gold in2018.
In the near-term for silver, Melek said that “specs haveplenty of room to grow their length relative to global asset values.”
By Neils ChristensenFor Kitco News
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