Are Gold Bears Feeling The Squeeze Yet?
(Kitco News)- Sentiment appears to be shiftingin the gold market and analysts are dismissing a new record in speculativebearish positioning shown in the latest data from the Commodity Futures TradingCommission (CFTC).
The CFTC's disaggregatedCommitments of Traders report (COT), for the week ending Oct. 9, showed moneymanagers dropped their speculative gross long positions in Comex gold futuresby 18,453 contracts to 82,218. At the same time, short bets rose by 11,398 contractsto 191,672. Gold’s net-short positioning currently stands at 109,454 contracts,a more than 37% increase from the previous week.
Net long or short positioning inthe CFTC data reflect 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.
Along with shorts hitting a newrecord high, the increase in positioning was the biggest percentage changesince mid-July. However, many analysts are throwing the latest report in the trashbin as the gold market saw a significant shift two days after the end of thesurvey period.
Thursday gold prices ralliednearly $30, its biggest move in two years. According to analysts, the push intogold came as U.S. equity markets saw it biggest five-day sell-off in two years.According to some analysts, investors have fled overvalued equity markets asbond yields rose to their highest level in seven years.
Traders and investors will haveto wait until Friday for the release of the next COT report, which will covergold’s 2% rally last week.
Fred Hickey, editor and creatorof the High-Tech Strategist newsletter, described the market action as bearish speculatorsheading in a “buzzsaw.”
“[The] COT will look differentnext week, but likely still extremely favorable,” he said in a twitter comment.“The record shorts (highly levered derivatives) against gold are toast, just asthey were in late-2000. Expect more short-covering spikes.”
Looks like Large Spec. gold futures traders sprinted headlong into yesterday's buzzsaw (steep gold rise),increasing net SHORT positions as of Tues. to 38.2K contracts. Futures&Options net short 57K (up 21.8K). COT will look different next week,but likely still extremely favorable
— fred hickey (@htsfhickey) October 12, 2018Ole Hansen, head of commoditystrategy at Saxo Bank, said that the new bearish positioning could explain thenearly $30 rally in gold as some short traders were quick to get out afterbeing caught on the wrong side.
He added that while bears arefeeling some pressure, he suspects that it will take gold prices to push above$1,240 an ounce to trigger another round of significant short covering.However, he added that with speculative positioning at record levels, there isthe potential to see gold $50 to $75 higher by the end of the year.
Analysts at Commerzbank also seepotential for higher prices in the near term. “There was certainly potentialfor short covering given that speculative financial investors had expandedtheir net short positions significantly again to a record high of nearly110,000 contracts in the last CFTC reporting week,” the analysts said in a report Monday.
Analysts are also optimistic thatthe silver market will see better days as prices rose in lockstep with goldlast week after a significant liquidation in bullish positioning recorded inthe latest COT data.
The disaggregated report showedmoney-managed speculative gross long positions in Comex silver futures fell by5,087 contracts to 45,587. At the same time, short positions rose by 107contracts to 86,851. Silver’s net-short positioning increased to 41,264contracts, an increase of 14% from the previous week.
Silver prices were relativelystable through the survey period, only to rise nearly 2% two days later.
By Neils ChristensenFor Kitco News
Follow neils_C
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. |