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Fund Managers' Net Bullish Gold Position Smallest Since Late January - CFTC Data

This article is more than 9 years old.

(Kitco News) - A sharp price drop prompted large speculators to cut their net-long positions in gold futures and options on the Comex division of the New York Mercantile Exchange to the smallest levels since late January.

These fund managers had been winnowing down their bullish holdings for most of May, as seen in the weekly commitments of traders report from the Commodity Futures Trading Commission, but the latest data shows large speculators are seeking to lift their gross short positions. The data is as of May 27.

Large speculators cut their net-long holdings in the platinum group metals in both the disaggregated and legacy reports. They also trimmed their bullish silver position in the legacy report, while building a relatively new net-short position in the disaggregated report. It’s only in copper where funds are showing some bullish tilt, having increased a net-long position in the disaggregated reading and cutting a net-short in the legacy data.

The metals were mixed during the time period covered by the latest CFTC report. Comex August gold fell $29.10 to $1,265.70 an ounce. July silver fell by 33.2 cents to $19.067. July platinum slid by $6.60 to $1,462.30 an ounce, while June palladium rose $5.20 to $831.55. Comex July copper edged up 3.25 cents to $3.1775 a pound.

The May 27 report includes the big drop gold made as it fell through the wedge technical chart formation, violating support around $1,280. That appears to have encouraged fund managers to build gross short positions.

Managed-money traders added 636 gross longs, but also added 22,601 gross shorts, lowering their net-long position to 68,393 contracts, the smallest since Jan. 28. Producers’ net-short position fell as they cut more gross short positions than gross longs, and did so in a significant way. Swap dealers also saw their net-short position drop as they cut a large number of gross shorts and added longs.

The non-commercials’ action was similar in the gold legacy report as they also lowered their net-long position to the smallest since Jan. 28. They cut 284 gross long contracts and added 24,088 gross shorts. They are now net-long 92,710 contracts. Commercials are net-short and cut that position by cutting more gross shorts than gross longs, reducing overall exposure.

“Gold specs (speculators) piled into short positions with gold breaking through the bottom of its recent range, as Russian tensions eased and U.S. data continues to look better,” said TD Securities.

MacNeil Curry, head of global technical strategy at Bank of America Merrill Lynch, said the outlook for gold is bearish, now that it broke through technical chart support.

“Downside targets are seen to $1,215-$1,184, (which is the) swing target and Dec. 31 low (respectively). Now, bounces are corrective and should not exceed $1,269-$1,272,” he said.

Analysts at Standard Chartered said to keep an eye on the gross short positioning, given how much it jumped in the current CFTC data.

“Gold short positioning increased by 72%, while long positions remained tranquil. If this upturn in gold shorts is the start of a new trend, short positioning has the potential to reach its highest in two years, i.e., outflows of (about) 80 tonnes (metric tons) of gold, compared with gold ETF (exchange-traded fund) outflows year-over-year of 372 (tonnes),” they said.

Managed-money accounts added to their newly established net-short position in silver by adding 64 gross longs and 5,112 gross shorts. Their net-short stands at 6,997 contracts. This is the largest net-short position for the disaggregated report since the CFTC started the calculation in September 2009. Producers decreased their net-short position when they cut gross shorts and added gross longs. Swap dealers increased their net-long position by adding gross longs and cutting gross shorts.

Non-commercials lowered their net-long position in the silver legacy report to 2,405 contracts by adding 1,546 gross longs and adding 4,960 gross shorts.  Commercials are net-short and reduced that position by adding gross longs and cutting gross shorts.

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Managed-money accounts in platinum trimmed their net-long position after three weeks of gains, cutting it to 38,195 contracts. Gross longs fell by 912 contracts and shorts rose by 26. Non-commercials in platinum reduced their net-long position in the legacy report to 46,700 contracts, having cut 1,597 gross longs and added 406 gross shorts.

“Platinum specs saw weaker price action as the top of recent trading ranges capped prices, forcing longs to liquidate some of their positioning,” TDS said.

Large speculators’ net-long palladium holdings fell in the disaggregated report, dropping to 21,815 contracts. They cut 922 gross longs and 364 gross shorts. The palladium legacy report saw non-commercials cut 1,159 gross longs and 389 gross shorts, lowering their net-long to 24,182 contracts.

Unlike action in the precious metals, the managed-money accounts’ net-long copper position rose. They added 897 gross longs and cutting 1,631 gross shorts. They are net-long 21,315 contracts, the highest since Jan. 21. In the legacy report, funds lowered their net-short position to 4,152 contracts, having added 1,044 gross longs and cut 200 gross shorts.

“The dwindling level of copper inventory in London Metal Exchange sheds (warehouse stocks), plus the return to draw trends in the last two weeks in Shanghai Futures Exchange inventory levels, is clearly providing some degree of support, while Chinese data on both a macro level and metals specific continue to be modestly positive,” Citi Research said.

By Debbie Carlson  dcarlson@kitco.com

Follow me on Twitter  @dcarlsonkitco