Funds Add To Bearish Gold And Silver Positioning; Has Bounce Begun

August 27, 2018

New York (Aug 27)  Money managers continued to add to their net bearish positioning in gold and silver futures during the most recent reporting week for data compiled by the commodity futures trading commission.

However, one firm said the pace of bearishness appears to be abating, while two others say market participants may have started to buy to cover, or exit, from short positions.

 During the week-long period to Aug. 21 covered by a late-Friday CFTC report, Comex December gold eased 70 cents to an even $1,200 an ounce, while September silver fell 28.7 cents to $14.766.

Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.

“The latest Commitment of Traders report showed a slowdown in the short assault on the gold and silver price, but despite that, it continued the record run of an increasing net speculative short position[ing],” said analysts at Hebba Investments in a commentary posted on Seeking Alpha.

The most recent “disaggregated” data shows that these funds’ net-short position grew to 90,028 futures contracts from 83,324 the week before. The number of longs rose by 2,340 contracts, meaning some fresh buying. However, this was dwarfed by the fresh selling, as the number of total shorts increased by 9,044 lots.

“As in the weeks before, it was mainly a question of short positions being increased while longs remained virtually unchanged,” said a research note from Commerzbank.

However, said analyst at both Commerzbank and TD Securities, some of the short positions likely were covered at the end of last week, especially after the price bounced from the recent lows to exceed the $1,200 mark again.

Hebba Investments said a potential double-bottom occurred in gold with light volume on Thursday, followed by a jump in prices on Friday. December gold rose as high as $1,215.40 an ounce Friday, compared to a low for the year of $1,167.10 on Aug. 16.

“While we don't know when the bounce will occur, all the fundamentals are screaming short-squeeze gold rebound,” Hebba said, saying it expects a “violent counter-rally” whenever the market gets a spark from some kind of gold-bullish catalyst.

Meanwhile, the net short in silver increased to 27,717 futures contracts from 22,291 the week before. The majority of this was long liquidation of bullish positions, as the number of total longs fell by 3,327 contracts. There was also fresh selling, as reflected by a 2,099 increase in gross shorts.


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