Hedge Funds Continue To Buy Gold But Market Losing Its Luster
(Kitco News)- Hedge funds continued to buy goldfor the sixth consecutive week, according to the latest trade data from theCommodity Futures Trading Commission, but analysts note that momentum isslowing.
The data shows that hedge fundsbought gold last week at the slowest pace since mid-December, when they wereactively selling the precious metal.
The Commodity Futures TradingCommission’s disaggregated Commitments of Traders report for the week endingJan. 23 showed money managers increasing their speculative gross long positionsin Comex gold futures by 8,630 contracts to 236,003. At the same time, shortbets rose by 626 contracts to 26,467. Gold’s net length increased to 209,536contracts.
Gold’s net length increased 4%from the previous week as prices were relatively unchanged during the surveyperiod.
Bill Baruch, president of BlueLine Futures, said that while he remains a long-term gold bull, he has become“neutral” on gold in the near term because of the market’s overboughtconditions.
“We remain bullish gold in thelong-run but believe there will be a better place to reposition,” he said. “Forus, it is tough to make the case to buy gold until first key support at$1,329.10-$1,331.90 is achieved.”
While some analysts have warnedthat the gold market is losing momentum as prices are starting to lookoverextended, others say that this could just be a short-term reprieve.
“We are confident that the marketwill pick up the pace again during the course of the week. After all, Wednesdaywill see Janet Yellen’s last Fed meeting, and U.S. labor market statistics forJanuary will be published on Friday. Depending on how much these influence theU.S. dollar, we will presumably see the gold price fluctuate accordingly,” saidanalysts Commerzbank.
The trade data also did notincorporate the recent price move that saw gold hit a 1.5-year high. Traderswill have to wait until Friday to see how high currency volatility during theWorld Economic Forum in Davos, Switzerland, impacted the gold market, as thisnews broke after the cutoff for the most recent CFTC data.
While investors continue toinvest in the gold market, the CFTC data showed that interest in silver remainsinconsistent.
For the second consecutive week,hedge funds continued to sell silver actively. The disaggregated report showedmoney-managed speculative gross long positions in Comex silver futures fell6,192 contracts to 53,714. At the same time, short positions rose by 3,645contracts to 30,117. Silver’s net length now stands at 23,597 contracts.
Silver’s net length dropped bymore than 29% during the survey period as prices struggled around the$17-an-ounce area.
However, some analysts areexpecting to see the bearish sentiment reverse in coming weeks.
“Silver specs aggressivelyreduced net length this week, as the recent rally in prices was met withskepticism, leading money managers to cover their longs and aggressively add totheir shorts,” said Bart Melek, head of commodity strategy at TD Securities.“But with the dollar weakness continuing throughout the week, it is likely thatthe few remaining bulls, who stuck to their guns, were content as prices brokethrough strong technical resistance and probably prompted the shorts to cover.The dollar weakness theme, in addition to waning mine supply, should seeinvestors regain interest in silver throughout the year.”
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.