Money Managers' Bullish Positioning In Silver Soars; Gold Length Also Climbs
(Kitco News) - Large speculators hikedtheir bullish positioning in silver futures by nearly nine-fold and also uppedtheir net long in gold by a more modest 9% during the most recent reportingweek for data compiled by the Commodity Futures Trading Commission.
During the week-longperiod to June 12 that was covered by the report, Comex Augustgold slipped by$2.80 to $1,299.40 an ounce, while July silver rose 43.8 cents to $16.891.
The next CFTC report couldshow a scale-back in the hedge funds’ bullish posture, however, as gold andsilver futures tumbled Friday. The August futures were at $1,282.90 an ounce andJuly silver was at $16.59 in early New York trading on Monday, meaning they noware down from where they were as of the last Tuesday cutoff for the CFTC data.
“Silver was hit significantly harder than gold on Friday,losing 3.5% by close of trading,” said analysts at Commerzbank in a researchnote. “As such, it has shed almost all of the gains it had accrued since thestart of the month. Because the price rise beforehand had been driven to alarge extent by speculation - speculative net-long positions were increasednine-fold to just shy of 41,000 contracts in the space of a week - there wasconsiderable downside potential here.”
Net long or shortpositioning in the CFTC data reflect the difference between the total number ofbullish (long) and bearish (short) contracts. Traders monitor the data to gaugethe general mood of speculators, although excessively high or low numbers areviewed by many as signs of overbought or oversold markets that may be ripe forprice corrections.
Not so many weeks ago,money managers were net short in silver, before moving into a modest net longin the last couple of weeks. The CFTC’s “disaggregated” report showed thatmoney managers then upped hiked their net-long position in silver futures to40,744 lots in the week to June 12 from 4,619 the week before. This was theresult of a combination of fresh buying (total longs rose by 20,103 lots) andshort covering (total shorts fell by 16,022).
“Silver specs aggressively increased their length headinginto the FOMC meeting [last] week,” said TD Securities. “Despite the highly expectedrate hike, along with stronger jobs and wage data [recently], anticipation thatthe Fed would imply a dovish tone at the meeting prompted shorts toaggressively cover. As prices broke through major resistance levels, contrarianmoney managers, who were perhaps watching the ugly duckling of the preciouscomplex from afar, gained conviction and added to their longs as the dollarweakened.
“However, late-week fears of a full blown trade wars [are]likely to decrease much of the recently added length as industrial metals cameunder pressure.”
Meanwhile, in goldfutures, the net-long position of money managers rose to 55,504 contracts from50,880 the week before. This was mostly due to fresh buying as the number oftotal bullish positions rose by 4,286, although there was also a trace of shortcovering as gross shorts fell by 338.
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.