Short-Sellers Return To Gold Market After Three Weeks Of Buying – CFTC
New York (Apr 20) Short-sellers stepped back into the gold market last week, ending three weeks of investor buying, according to the latest data from the Commodity Futures Trading Commission.
The disaggregated Commitment of Traders Report (COTR), for the week ending April 14, showed money-managed speculative long positions of Comex gold futures dropped for the first time in three weeks. Gross long positions fell by 2,308 contracts to 110,439. At the same time, short-sellers added to their positions for the first time in two weeks, increasing their short bets by 5,318 contracts to 62,390. Gold’s net length now stands at 48,049 contracts.
During the survey period, gold prices were fairly volatile, falling more than 1%. The biggest move in gold came after the release of the minutes of the March Federal Open Market Committee meeting. Analysts noted the discussion highlighted in the minutes left room for the central bank to hike rates as early as June, which strengthened the U.S. dollar and hurt gold prices.
Analysts at Commerzbank noted that gold’s net length dropped 14% from the prior week. They were not surprised to see traders close out some of their recent long positions, previously describing the recent buying activity as “shaky.”
Despite shift in market sentiment, commodity analysts from Barclays said that they see the market as relatively balanced, adding that there are higher risks for a short-covering rally to lift prices in the near term.
“Both gross shorts and gross longs are above their average over the past year, implying scope for movements in both directions. On balance, there is greater scope for a short covering rally,” they said in a research note Monday.
Although gold is seen as relatively balanced, analysts noted that negative investor sentiment is growing in the silver market. The disaggregated COTR showed money-managed speculative long positions of Comex silver futures dropped for the second week by 2,958 contracts to 45,308. At the same time short contracts rose by 5,676 contracts to 23,358. Silver’s net length now stands at 21,950 contracts.
During the survey period, silver prices dropped 4%. Analysts at Commerzbank said the significant shift in speculative interest was probably one of the major contributing factors behind last week’s bearish price action.
Not only is silver being dominated by a stronger U.S. dollar, analyst at Bank of America Merrill Lynch said that weak industrial demand has been a significant factor in declining investor interest. However, the analysts remain bullish on silver expecting to eventually see a price of $17.41 an ounce and higher.