Gold Bears Feeling Some Heat But Not Sweating Yet - Analysts
(Kitco News)- Hedge funds continue to pare backtheir historic gold short positions but at a glacial pace, with the yellowmetal continuing to hang around the critically important psychological area of $1,200an ounce.
The latest trade data from theCommodity Futures Trading Commission showed money managers shed some of theirbearish bets for the second time in the last three weeks.
The CFTC's disaggregatedCommitments of Traders report, for the week ending Sept. 11, showed moneymanagers dropped their speculative gross long positions in Comex gold futuresby 1,058 contracts to 100,593. At the same time, short bets fell at a fasterpace of 8,561 contracts to 175,812. Gold’s net-short positioning currentlystands at 75,219 contracts. While still near historic levels, gold’s net lengthdeclined by 9% 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.
According to some analysts, shortcovering during the survey period helped to push gold prices to a two-weekhigh; however, the buying pressure wasn’t enough to spark a larger shortsqueeze.
Ole Hansen, head of commoditystrategy at Saxo Bank, said in a recent interview with Kitco News that hethinks prices need to push above $1,236 before gold bears start to get nervous.
While the price action in goldhas been relatively neutral with little momentum found on either side of the$1,200-an-ounce level, analysts at Commerzbank said that speculativepositioning still supports higher prices.
“[Gold shorts] are still at ahigh level at a good 75,000 contracts, however, so there is further potentialfor short covering and therefore for higher prices from this side,” they said.
Commodity analysts at TD Securitiesalso see further potential for a short-covering rally in gold. However, thebank is also optimistic on gold because of another indicator in the trade data.
While money managers are netnegative gold, TDS noted that commercial positions are bullish and at theirhighest levels since 2001, “which implies they see value at current prices,”the analysts said.
“That being said, we suspect thatany rally in gold will remain short-lived until the dollar weakens further,”they added.
While some commodity analysts seepotential for gold, they are not so optimistic on the silver market asinvestors on both sides reduce their exposure in the precious metal.
The disaggregated report showedmoney-managed speculative gross long positions in Comex silver futures droppedby 2,525 contracts to 53,034. At the same time, short positions fell by 3,373contracts to 101,109. Silver’s net-short positioning was relatively unchangedfrom the precious week at 48,075 contracts.
During the survey period silverprices fell to a low not seen since early 2016. At the same time, thegold-silver ratio hit its highest level in more than 20 years. The pricecontinues to hover around its recent lows, just above $14 an ounce.
According to some analysts, notonly does sentiment in the precious-metal market need to improve but optimismalso needs to rise in base metals before silver prices can outperform gold.
By Neils ChristensenFor Kitco News
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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.