Funds Trim Gold Net Long, Build Record Silver Net Short
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(Kitco News) - Large speculators trimmedtheir bullish gold position and now have their largest bearish net positioning everin silver, based on the latest reporting week for data compiled by theCommodity Futures Trading Commission.
Thenet-short, or bearish, positioning in silver stood at a record high as of theFeb. 27 cut-off date for the most recent CFTC statistics, pointed outcommodities brokerage SP Angel and Commerzbank.
During the week-longperiod that was covered by the report, ComexApril gold fell $12.20 to $1,319.20an ounce. May silver slid 5 cents to $16.43.
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.
The disaggregated reportshows that money managers decreased their net-long position in gold to 150,019lots from 175,455 the prior week, which INTL FCStone characterized as a “heftydrawdown.” This was due to both long liquidation (as reflected by a decline of12,923 gross longs) and fresh selling (as reflected by an increase of 12,513total shorts).
Still, last week’s price action opened the doorto a “tremendous opportunity” for bulls to reposition, said BillBaruch, president of Blue Line Futures.
“Though longs beganreducing their holdings in February, shorts did so at a faster pace and thenet-long position [ratio] was at 13:1 as of reporting Feb. 20th,” hesaid. “As of reporting for the week ending this last Tuesday the net-longposition reached 6.5:1, the lowest level since the week ending Dec. 27th; goldrallied $70 or 5.5% from that point to its high.
“Our assumption here isthat Thursday’s sharp sell-off to major three-star support forced furtherliquidation from the long camp and many of those longs have yet to reposition.In conclusion, we remain outright bullish in bias and believe that gold is onesmall catalyst away from a strong surge higher.”
In silver, money managers’net-short position now stands at 16,435 lots, compared to a net short of 10,522the previous week. This was mainly due to fresh selling by large speculators,as the number of total short positions rose by 6,389. Gross longs also climbed- by 476 - but this was overshadowed by the fresh bearish trades.
“Silver continues to fall out of investor favor with hedgefunds and other large speculators, [which] are now most bearish ever on theprecious metal,” said commodities brokerage SP Angel.
In a monthly commodities outlook,INTL FCStone said gold and silver could face headwinds from a stronger U.S.dollar and bond yields during March, with a Federal Open Market Committeemeeting scheduled for mid-month.
“In the silver’s case, the latestCFTC data seems to suggest that funds are coming around to that conclusion aswell,” INTL FCStone said.
Added Commerzbank: “Net shorts in silver were record-highon the reporting date because speculative financial investors had expandedtheir bets on falling silver prices.”
By Allen SykoraFor Kitco News
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