Analysts Ask: Is Gold Ready To Rally With Bullish Bets Close To 2.5-Years Low?
(Kitco News)- Hedge funds continued to shed theirbullish gold bets, but some analysts said that there are signs that the sellingmomentum is starting to fade.
The latest data from the CommodityFutures Trading Commission shows net bullish speculative positioning in thegold market at its lowest level since late-January 2016.
The CFTC's disaggregated Commitmentsof Traders report for the week ending May 22, showed money managers reducedtheir speculative gross long positions in Comex gold futures by 11,845contracts to 91,411. At the same time, short bets fell by 9,378 contracts to74,880. Gold’s net length now stands at 16,531.
Gold’s net length dropped 12% from theprevious week as the selling pressure pushed prices to a new five-month lowduring the week-long survey period. However, the fact that gold was able tohold critical long-term support above $1,280 an ounce is a sign that the marketis oversold, according to some analysts.
Net long or short positioning in theCFTC data reflects the difference between the total number of bullish (long)and bearish (short) contracts. Traders monitor the data to gauge the generalmood of speculators, although excessively high or low numbers are viewed bymany as signs of overbought or oversold markets that may be ripe for pricecorrections.
Olen Hansen, head of commoditystrategy at Saxo Bank said that the gold market is, “building up for a newupside attempt once the fundamental and/or technical outlook improves.”
Commodity analysts at TD Securitiessaid that continued strength in the U.S. dollar continues to weigh on gold;however, they also see the potential for a recovery in gold in the near-term.
“Between the FOMC minutes striking adovish tone, and Trump canceling the meeting with North Korea's Kim, theprecious metals environment should appear more attractive moving forward,” theysaid.
While gold is struggling to attractinvestor interest, the silver market appears to be turning a corner as newbullish bets and short-covering supported prices last week, according to thetrade data.
The disaggregated report showedmoney-managed speculative gross long positions in Comex silver futures rose by7,347 contracts to 56,388. At the same time, short positions fell by 8,676contracts to 56,978. Silver's net short positioning currently stands at 590contracts.
This is the third week that silver hasseen a decline in its net short positioning as prices rose nearly 2% during thesurvey period.
Analysts have been relativelyoptimistic on silver, but they have also said that investors need to see pricespush above $17 an ounce before they jump back into the market.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.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.