Money Managers Slash Net Bullish Gold Positioning
(Kitco News) - Large speculators scaled back their bullish positioningin gold futures during the most recent reporting week for data compiled by theCommodity Futures Trading Commission.
In fact, commodities brokerage SP Angel reports thatbullish bets are now at the lowest level in more than two years.
During the week-long period covered by the report, Comex June gold fell $23.40 to $1,290.30 an ounce, while July silver lost 20.3 centsto $16.269.
Net long or short positioning in the CFTC data reflects the differencebetween the total number of bullish (long) and bearish (short) contracts.Traders monitor the data to gauge the general mood of speculators, althoughexcessively high or low numbers are viewed by many as signs of overbought oroversold markets that may be ripe for price corrections.
The CFTC’s “disaggregated” report shows thatmoney managers’ net length in gold futures fell to 18,998 contracts in the weekto May 15 from 41,639 the prior week.
“Gold specs reduced positioning last week,liquidating longs and adding new shorts,” said a research note from TDSecurities. “Traders were convinced to get bearish the yellow metal as afurther rally in the U.S. dollar, along with 10-year interest rates breaching3%, saw prices trend lower and ultimately break the $1,300/oz support level.”
The bulk of the decline in net bullishpositioning was due to fresh selling, as reflected by a 16,389 increase ingross shorts. There was also some long liquidation, as the number of totallongs fell by 6,252.
SamuelLaughlin, senior trader with MKS (Switzerland) S.A., pointed out that the CFTCdata showed that “dollar demand was evident,” with speculators having purchasedjust under $2.5 billion worth of U.S. dollar contracts while decreasing shortpositioning to $11.3 billion.
TDS does see an eventual price recovery in gold.
“While we expect gold to continue to trade inlockstep with the dollar in the near term, we suspect that the Fed will not beaggressive in raising rates, which should see gold perform better in the secondhalf of the year,” analysts said.
In the case of silver, the net short was paredmodestly to 16,613 futures contracts from 19,483 the week before. This was theresult of short covering (total shorts fell by 1,748 lots) and fresh buying(total longs rose by 1,122).
By Allen SykoraFor Kitco News
Follow @AllenSykora
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