Large Speculators Cut Gold Net-Long Positions For Second Week - CFTC Data

(Kitco News) - For the second week, large speculators cut their net-long gold futures and options positions at the Comex division of the New York Mercantile Exchange, following price weakness and possible positioning ahead of the March U.S. nonfarm payrolls report.

According to the latest weekly commitments of traders data from the Commodity Futures Trading Commission for the week ended April 1, these traders also cut net-long positions in silver in both the agency’s disaggregated and legacy data. Large speculators’ activity in the platinum group metals was mixed while these traders reduced their copper net-short positions.

Comex June gold tumbled by $31.40 to $1,280 an ounce during the week covered by the latest CFTC report. May silver fell 29.1 cents to $19.688. June palladium fell by $7.45 to $781.95.  Nymex July platinum bucked the trend and rose by $7 to $1,429.60. Comex May copper gained 2.9 cents to $3.0345 a pound.

The bearish combination of long liquidation and new short positions reduced the money managers’ net-long holdings in gold futures and options to 106,354 contracts in the disaggregated report, dropping it to the lowest level since Feb. 18. These traders cut 8,136 gross longs and added 5,551 gross shorts. Producers’ net-short positions fell as they cut many more gross short positions than gross longs. Swap dealers saw their net-short positions fall as they cut shorts and added longs.

Non-commercials repeated this activity in the gold legacy report as they slashed 10,443 gross longs and added 7,967 gross shorts. They are now net-long 127,121 contracts, also the smallest since Feb. 18. Commercials are net-short and reduced that position by cutting more gross shorts than gross longs.

TD Securities suggested the gold investors cut long exposure and added shorts “in anticipation (that) strong U.S. employment would send prices lower.” Gold prices rose after the employment came in near expectations. However, the CFTC data is only up to Tuesday, so the report does not cover the report reaction.

A few analysts said looking at the CFTC data, and combining it with the outflows seen in gold exchange-traded funds, speculative investors were becoming hesitant to hold to bullish positions.

“Gold gross speculative short positions increased for a second straight week and indicated an increase in investor expectations for lower prices, in our view,” said HSBC.

UBS noted the overall decline on long liquidation and some new shorts coincides with the large reduction in open interest since gold peaked on March 17. UBS also said since shedding longs was more prevalent than adding shorts, it “implies that while sentiment towards gold has weakened, the conviction to short gold isn't absolute – that's a positive for the metal.”

Managed-money accounts again reduced their net-long silver holding, trimming it to 5,582 contracts, cutting their position nearly in half from the previous week and the lowest position since early February when they were briefly net-short silver. They cut 1,458 gross longs, but added 2,540 gross shorts. Producers lowered their net-short position when they cut gross shorts and added gross longs. Swap dealers trimmed their net-short position as they added gross longs and cut gross shorts.

In the legacy report, the silver net-long for non-commercials fell to 11,120 contracts as new bearish positions overwhelmed new bullish trades. This was also the lowest net-long position since early February. Gross longs fell by 1,347 contracts and gross shorts increased by 3,214 contracts.  Commercials are net-short, but cut that position by adding gross longs and trimming gross shorts.

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Managed-money accounts in platinum trimmed their net-long position to 29,891 contracts as they cut 2,161 gross longs and added 1,356 shorts. Non-commercials in platinum also trimmed their net-long position in the legacy report, to 41,330 contracts, having cut 1,138 gross longs and added 2,370 gross shorts.

The net-long position that large speculators hold in palladium rose, but it came as these traders reduced exposure in general to the metal. In the disaggregated report, the managed-money accounts slightly increased their net-long position to 20,732 contracts by cutting 168 gross longs and 1,070 gross shorts. The palladium legacy report saw non-commercials trim 877 gross longs and 948 gross shorts, boosting their net-long to 23,309 contracts, a modest rise from the week prior.

In copper, hopes that China would stimulate its economy encouraged speculative shorts to cover positions, TDS said, but the Chinese news “had a mixed success at best.”

In the disaggregated report, managed-money accounts are net-short 19,778 contracts. They added 294 gross longs and cut 4,962 gross shorts. In the legacy report, funds are now net-short 25,743 contracts of copper, having added 68 gross longs and 7,132 gross shorts.

Standard Chartered analysts noted that speculators previously were building a larger net-short position, but with prices holding near $3 a pound for the past four weeks, it encouraged short covering. “Producer hedging has fallen close to its lowest in two years, meaning that producers expect prices to rise from here,” the firm added.

For further information, see the CFTC’s website.

By Debbie Carlson  dcarlson@kitco.com

Follow me on Twitter @dcarlsonkitco