Short Covering Lifts Speculators' Gold Holdings In Latest CFTC Data
New York (Dec 8) Short covering lifted large speculators’ Comex gold futures and options holdings in the latest Commodity Futures Trading Commission weekly data, after a modest increase in gold prices in the timeframe covered by the report, which is for the week ending Dec. 2.
Since funds arrested the slide in their net-long holdings in the past few reports, the rise in net-long holdings have come mostly on the back of short covering, rather than a big build of new bullish positions. Short covering is when market participants buy back previously sold positions and exit the trade.
Fund managers added to their bullish positions in silver, but had mixed action in the platinum group metals. These traders added to their bearishness in copper as they increased net-short holdings. The data includes information from both the CFTC’s disaggregated report and legacy reports.
Metals prices were mostly weaker during the time period covered by the latest CFTC report. Comex February gold managed to buck the weaker price trend, rising $1.60 an ounce to $1,199.40. March silver fell 15.50 cents to $16.456. January platinum fell $7 to $1,217.50 an ounce. March palladium was the only other gainer in the metals complex, rising $6.90 to $803.75. Comex March copper fell, dropping 8.6 cents to $2.8915 a pound.
Managed-money traders’ net-long holdings rose to 79,497 contracts, the highest since Aug. 26, as they added 3,692 gross longs and cut 9,577 gross shorts, meaning they cut bearish trades and added bullish ones. Producers and swap dealers both bolstered their net-short positions by cutting gross longs and added gross shorts.
As in the disaggregated report, the non-commercial traders in the gold legacy report also added gross longs and cut shorts. They added 4,428 gross long contracts and cut 8,844 gross shorts. They are now net-long 104,751 contracts, the highest since Sept. 2. Commercials are net-short and raised that position by cutting gross longs and adding gross shorts.
Analysts at Commerzbank said based on the CFTC data, fund activity is behind the recent rise in gold prices.
Joni Teves, analyst at UBS, concurred. She said gold’s ability to hold near the $1,200 area “over the last three weeks has mostly been driven by short covering, amplified by thin liquidity conditions. After reaching the year’s high of 16.30moz (million ounces) in early November, gold gross shorts have consistently declined by 1.50moz per week. Latest CFTC data shows that gold shorts have declined by a total of 4.50moz or 28% to 11.80moz as of Dec. 2, which is the lowest level since the beginning of September. During this period, gold gross longs have increased by 1.00moz or 5%.”