Large Speculators Add To Gold Bullish Positions For First Time Since Mid-August
New York (Oct 20) After cutting bullish Comex gold futures and options holdings for eight straight weeks, large speculators added to their net-long holdings, according to data compiled by the Commodity Futures Trading Commission.
The rise in net-long gold positions in the disaggregated and legacy reports coincides with a rebound in prices for the time period ending Oct. 14. For rest of the metals complex, the situation was mixed. In silver, funds expanded a net-short position in the disaggregated report and reduced a net-bullish position in the legacy data. In the platinum group metals, large speculators cut palladium exposure, but added to platinum positions. In copper, funds narrowed their net-short position.
Metals prices rose during the time period covered by the latest CFTC report. Comex December gold gained $21.90 to $1,234.30 an ounce. December silver gained 16.30 cents to $17.403. January platinum rose $10.40 to $1,272.30 an ounce. December palladium rose $8.10 to $795.10. Comex December copper rose 5.1 cents to $3.09 a pound.
Managed-money traders ended the slide in their gold net-long position, adding to their holdings for the first time in eight weeks. Their net-long position now stands at 51,994 contracts. In the Oct. 14 CFTC report, the managed-money traders added 13,308 longs and cut 1,412 gross shorts. Producers’ net-short positions rose as they added more gross shorts than gross longs positions. Swap dealers saw their net-short positions rise as they cut gross longs and added gross shorts, reversing a recent trend.
The non-commercial traders in the gold legacy report also added new longs and cut shorts. They added 18,912 gross long contracts and cut 1,481 gross shorts. They are now net-long 87,360 contracts. Commercials are net-short and bolstered that position by adding gross shorts and cutting gross longs.
Market watchers said ahead of the data’s release that they expected the CFTC data to show a mix of short covering and new long positions added after the rise in open interest during the recent rally.
Bart Melek, head of commodity strategy at TD Securities, said speculators covered their short holdings and aggressively increased long positioning “amid growing concern external economies will slow the U.S. and that weaker-than-expected data will postpone any potential Fed (Federal Reserve) tightening.
Analysts at Commerzbank noted the markedly increased interest in gold by money-managers in the current CFTC data. However, they said, “developments on the equity markets and the course of the dollar will largely determine how long this trend lasts. It also remains to be seen how strong physical demand in India is following the holidays this week. Gold could therefore suffer a setback again.”
Barclays’ analysts said the increase in funds’ gross longs in this report pushes their gross long position to the highest since July. However, they added gross shorts are at their highest since December, “leaving scope for a short-covering rally, particularly if U.S. macro data disappoints again. Views are becoming divided on gold.”
Analysts at Citi said gold’s outlook became a bit brighter lately as “a confluence of weaker macroeconomic data and risk-averse asset market flows have boosted Comex prices (about) 3% off (year-to-date) lows.”
However, they added new bulls should be wary of the coming Federal Open Market Committee meeting next week.
“With the October FOMC meeting looming, this modest and choppy unwind in USD (U.S. dollar) length … could be quickly eradicated should the Committee affirm a hawkish policy path - against the advice of some members such as (St. Louis Federal Reserve President James) Bullard in recent speeches - particularly as producers have been selling at larger clips since crossing the $1,210 mark,” they said.
Managed-money traders boosted their net-short in silver for the fourth week. Their bearish position now stands at 9,089 contracts, the highest since June 3. The large speculators cut 559 gross longs and added 1,459 gross shorts. Producers decreased their net-short positions by cutting more gross shorts than gross longs. Swap dealers increased their net-short position by cutting more gross longs than gross shorts.
In the legacy report, non-commercials cut 88 gross longs and added 1,087 gross shorts, lowering their net-long position to 1,812 contracts. This remains the smallest net-long since June 10. Commercials are net-short and increased that position by cutting more gross longs than gross shorts.
Unlike gold, investors remain wary of silver, analysts said. “Investors continued to limit silver longs and increase short holdings in the face of slowing global economic activity. It is a much more industrial metal than gold,” Melek said.