Hedge Funds Jump Back Into Gold, Ending Four Weeks Of Selling
(Kitco News)- After four weeks of selling,hedge funds jumped back into the gold market and pushed prices to a 5.5-weekhigh, according to the latest trade data from the Commodity Futures TradingCommission.
The CFTC’s disaggregatedCommitments of Traders report for the week ending March 27 showed moneymanagers increased their speculative gross long positions in Comex gold futures by 34,928 contracts to 183,080. At the same time, short bets fell by 15,428contracts to 20,917. Gold’s net length increased to 162,163 contracts.
The data show that the goldmarket saw its most significant shift in bullish sentiment in nearly two years.Gold’s net length jumped 45% from the previous week. The strong buying momentumpushed prices up by more than 2% during the survey period, hitting a five-weekhigh.
According to many analysts, aperfect storm hit the gold market as the Federal Reserve signaled that it wasin no hurry to raise interest rates, and investors fled to safe-haven assets due to rising geopolitical concerns and the growing threat of a trade war.
“Gold specs aggressivelyincreased their net length as Fed [Chair Jerome] Powell delivered a dovishhike, which gave bulls the ammunition needed to pile on longs, while shortswere forced to cover, as the yellow metal rallied some $50/oz in the aftermathof the hike,” said analysts at TD Securities in a report Monday.
George Gero, managing directorwith RBC Wealth Management, said that the weeks of lower prices, coupled withfalling open interest, represented the perfect opportnity for bargain hunters. Headded that he expects hedge funds to continue to buy gold.
“Attention is back on gold asinvestors are shunning bonds and equities,” he said. “The gold market has solidgeopolitical underpinnings.”
While investors were buying gold,they were ignoring other precious metals. During the survey period, thegold/silver price ratio continued to trade near a two-year high. Analysts havesaid that the rising ratio is a sign that investors are more interested insafe-haven assets. While silver is considered a monetary metal, it does have asignificant industrial market, which also makes it a cyclical commodity.
The disaggregated report showedmoney-managed speculative gross long positions in Comex silver futures fell by 611contracts to 31,988. At the same time, short positions fell by 2,180 contractsto 66,252. Silver’s net-short positioning now stands at 34,264 contracts,relatively unchanged from the previous week.
Despite the weak bullishsentiment among fund managers, silver saw solid gains, with the price rising 2%during the survey period.
While silver has been adisappointment for many investors, some analysts continue to see a potentialfor the white metal.
“The bullish precious metalssentiment highlights the potential for silver to outperform this year as specpositioning continues to make record lows,” TDS said.
By Neils ChristensenFor Kitco News
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