Specs Rebuild Bearish Gold Positions, But This Could Be Temporary
(Kitco News) - Large speculators rebuilt theirbearish positioning in gold futures during the most recent reporting week fordata compiled by the Commodity Futures Trading Commission, yet this may havebeen a temporary phenomenon, with prices since rising again amid a fall in the U.S. dollar, analysts said.
During the week-long period toOct. 30 covered by the CFTC’s report, Comex December gold fell by $11.50 to$1,225.30 an ounce, while December silver lost 33.1 cents to $14.462. Sincethat Oct. 30 cut-off, however, both metals are higher again - with gold at$1,233.50 and silver at $14.695 as of 10 a.m. EST.
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.
“Gold specs returned to reducinglength, as investors took profits amid a more stable equity market,” said aresearch note from TD Securities. “But, with the equity market still on edgeand the VIX [Index] north of 20, along with the U.S. dollar easing off thehighs and the Chinese yuan strengthening amid trade optimism, traders likelytook on some new longs at the end of [last] week.”
The most recent disaggregatedreport shows that money managers’ net-short position increased to 55,523futures contracts from 38,116 the week before. Prior to this, the net-shortposition had declined by 65% in the two previous reporting weeks after it hadstood at 109,454 on Oct. 9.
The bulk of the decline during theweek to Oct. 30 was longs bailing out of positions, as the number of longsdeclined by 19,263. The number of shorts fell 1,856 lots.
The reduction in the net-shortthe previous week, coupled with U.S. dollar strength, both played roles inmoney managers hiking their net short again as of Oct. 30, said Ole Hansen,head of commodity strategy at Saxo Bank. However, gold prices got a boost atthe end of last week, after the cutoff for the CFTC data, when the dollar weakenedagain, he added.
In the case of silver, thenet-short position of money managers increased to 25,176 lots from 21,025 theweek before. The increase was driven by primarily fresh selling, as grossshorts increased by 3,927 lots. Gross longs declined by 224.
By Allen SykoraFor Kitco News
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