Money Managers Continue Scaling Back Bearish Gold Positioning
(Kitco News) - Largespeculators have continued to exit from their one-time large net-bearish post ingold futures, trimming this by roughly two-thirds over the course of the lasttwo reporting weeks for data compiled by the Commodity Futures TradingCommission.
“The gold price continued to recover accordingly in theperiod under review,” said analysts with Commerzbank. The move has occurredduring a weak month for U.S. equities.
Duringthe week-long period to Oct. 23 covered by the most recent CFTC report, ComexDecember gold rose 0.5% to $1,236.80 an ounce, while December silver climbed 0.6%to $14.793.
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 commission issues tworeports each Friday -- a so-called “legacy” report and a “disaggregated”report, started in 2009 and meant to offer more detail.
The disaggregated reportshowed that money managers further trimmed their net-short position in gold futuresto 38,116 contracts from 49,382 the weekbefore. Over the past two weeks, they have slashed that net short by 65%, afterit had stood at 109,454 as of Oct. 9.
During the most recentreporting week, the number of total shorts fell by 7,231 contracts, reflectingshort covering, in which traders buy to cover or exit from short positions. Thegross longs climbed by 4,035, representing fresh buying.
“Gold specs continued to cover shorts and add to longpositions, as the equity market meltdown accelerated,” said TD Securities. “Theyellow metal rallied to as high as $1,243/ oz on Friday. Gold held firm despitethe fact that the U.S. dollar index traded near its yearly highs, suggestingthat the recent strength has been a product of short covering and safe-havendemand rather than macro appetite.
“As such, we question gold's ability to rally furtherwithout a continued equity market rout and USD weakness - which is unlikelyuntil global central banks converge their policy to that of the Fed's.”
Silver futures alsobenefited from short covering, said Commerzbank. Money managers’ net-short positionwas trimmed to 21,025 contracts from 33,399 at the end of the previousreporting week. Gross shorts fell by 7,555 lots, while gross longs increased by4,819.
“The silver price has likewise recovered somewhat of late,though not to the same extent as the gold price,” Commerzbank said. “Thegold/silver ratio has risen to 84 as a result.”
By Allen SykoraFor Kitco News
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