Hedge funds staying away from gold and silver, focus on tightening monetary policies
(Kitco News) - Hedge funds remain hesitant to jump back into the gold market as the Federal Reserve looks to tighten its monetary policy in the faceof growing inflation pressures, according to analysts evaluating the latesttrade data from the Commodity Futures Trading Commission.
Analysts note that although gold prices have managed to holdsupport above $1,750 an ounce, it has not attracted enough investor interestfor a sustainable push above $1,800 an ounce.
The CFTC disaggregated Commitments of Traders report for theweek ending Oct. 12 showed money managers increased their speculative grosslong positions in Comex gold futures by 4,923 contracts to 131,668. At the sametime, short positions increased by 570 contracts to 73,149.
Gold's net length now stands at 58,519 contracts, relativelyunchanged from the previous week. During the survey period, gold prices werecaught in a narrow range, holding support above $1,750 an ounce.
Although gold prices managed to push to $1,800 an ounce lastweek, the rally was fleeting, with prices falling back to where they startedthe week. December gold futures last traded at $1,766.50 an ounce, down 0.10%on the day.
"The prospect of a prolonged period of higher inflationhas just started to make its way into asset prices. Stagflationary risksassociated with the energy crisis have catalyzed a rise in breakeven inflation,but have also kept nominal rates under wraps," analysts at TD Securitiessaid in a report. "While this should support precious metals, particularlyamid the ongoing energy crisis, market pricing for Fed hikes has thus far keptgold prices from surging just yet."
Although gold prices have struggled to attract investorattention, many analysts expect that momentum should shift after the FederalReserve starts to tighten its interest rate, beginning with a reduction of itsmonthly bond purchases by the end of the year.
It's not just gold that continues to suffer from a lack ofinvestor interest.
The disaggregated report showed that money-managedspeculative gross long positions in Comex silver futures fell by 16 contractsto 47,447. At the same time, short positions dropped by 428 contracts to42,391.
Silver's net length stands at 5,056 contracts, relativelyunchanged from the previous week. During the survey period, silver pricesmanaged to test resistance around $23 an ounce.
According to analysts, silver is being weighed down bylackluster demand in the gold market as industrial metals are seeing renewedinvestor interest.
Copper's disaggregated report showed money-managedspeculative gross long positions in Comex high-grade copper futures rose by8,008 contracts to 65,593. At the same time, short positions fell by 962contracts to 30967.
Copper's net length is currently at 34,626 contracts,increasing nearly 35% from the previous week. Copper prices saw renewedmomentum during the survey period as prices managed to push above initialsupport around $4.30 an ounce.
"Buyers returned to under-owned copper after the pricefinally shrugged off China concerns," said Ole Hansen, head of commoditystrategy at Saxo Bank. "The net long jumped by one-third, but it remainswell below the 91.6k lots peak reached one year ago."
By Neils ChristensenFor Kitco News
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