Easy Come, Easy Go; Funds Dump Gold And Increase Bearish Bets

May 27, 2019

New York (May 27)  As fickle as the shifting sands in an hourglass, investment sentiment in the gold market has reversed again with fund managers giving up most their long bets from the previous week and adding fresh short positions, according to the latest trade data.

The CFTC's disaggregated Commitments of Traders report, for the week ending May 21, showed money managers decreased their speculative gross long positions in Comex gold futures by 23,481 contracts to 114,986. At the same time, short bets rose by 13,128 contracts to 99,049. The gold market managed to hold on to its net-long positioning by 15,937 contracts, a decline of 69% from the previous week.

The contraction in gold's net-length was not a major surprise to most analysts as the gold prices were unable to hold gains above $1,300 an ounce. During the survey period, gold prices fell to a three-week low below $1,270 an ounce.

"Gold's frustrating lack of response to weaker stocks and lower bond yields helped trigger a 42k reduction in the net-long, more or less what was added the previous week," said Ole Hansen, head of commodity strategy at Saxo Bank.

In a recent interview with Kitco News, Afshin Nabavi, head of trading with MKS, said that the lack of speculative interest in gold is the most significant factor holding back the yellow metal.


Although the lack of conviction in the gold market is frustrating some, Nabavi said that investors should keep the faith. "With all the rising tensions, gold is still the best safe-haven commodity," he said. "I don't see any better investment than gold at the moment."

Commodity analysts at TD Securities are also looking for the gold market to regain its luster.

"Continued dovishness from central banks and potential growth concerns amid renewed trade tensions should prompt money managers to grow their allocations to the yellow metal as data begins to deteriorate," the analysts said in a report.

But it's not just gold that is suffering from a listless investor interest; in fact when it comes to market pessimism, silver is in a class all by itself.

Pessimism in the silver market rose sharply last week with the trade data showing investors dumping their long positions and increasing their short bets.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fall by 4,578 contracts to 52,557. At the same time, short positions rose by 10,656 contracts to 81,988. Silver's net-short positioning increased to 29,431 contracts, more than doubling the previous week's positioning.

"The last time speculators were this pessimistic was in November, when silver was trading at a good $14 per troy ounce – i.e. not much lower than now," said analysts at Commerzbank.

However, like November, Commerzbank analysts added that silver's fortunes could quickly turn.

"Six months ago, silver subsequently saw massive short covering that pushed the silver price up to $16," they said.


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