The recent drop in metals prices sent speculators scurrying from bullish gold and silver futures and options traded on the Comex division of the New York Mercantile Exchange, according to U.S. government data.
For the week ended March 6, speculators in the Commodity Futures Trading Commission’s weekly commitment of traders report saw their net-long positions in gold and silver drop significantly in both the legacy and disaggregated reports. Speculative positions in the platinum group metals fell somewhat, while action in copper was mixed.
Prices skidded in all of the New York metals during the week-long period covered by the most recent CFTC report. Through March 6, April gold dropped $116.30 an ounce to settle at $1,672.10. May silver slid $4.422 to $32.783, June palladium fell $50.60 to $671.60, and April platinum declined $111.60 to $1,611.90 an ounce. May copper slipped 18.4 cents to $3.7375 per pound.
Managed-money accounts slashed exposure to gold futures and options, decreasing their net-long position to 145,997 contracts. Managed-money accounts cut 48,118 gross longs and added 3,437 gross shorts. Producers and swap dealers remain net-short, but sharply reduced that position by cutting a significant number of gross shorts and adding gross longs.
Non-commercials in the legacy report also sharply decreased their net-long position, having hacked 52,486 gross longs and trimmed 2,967 gross shorts. They are now net-long 172,024 contracts. Commercials are net-short, but sharply reduced gross shorts and raised gross longs.
UBS said the sharp drop in Comex gold net longs is the largest weekly decline since April 2004. “The move was entirely on the back of longs getting out, reversing all of the gains since the Jan. 25 FOMC (Federal Open Market Committee) meeting,” said Edel Tully, strategist at UBS.
Furthermore, she said looking ahead to the coming report slated for release Friday after the session’s close, with gross shorts are likely to have increased “sizably.”
Even though speculative positions dropped significantly, she said, prices didn’t fall as much. “That prices have been more resilient, falling only 7% despite a 23% decline in positioning, is encouraging, considering that the most recent selloff of similar magnitude – the 21% contraction in the Comex gold book back in September – resulted in a considerably larger 20% drop in the price of gold. Nevertheless, we maintain some degree of caution at this stage,” Tully said.
Silver net-long positions for the managed-money accounts fell, dropping to 24,090 contracts. The fall came from cutting 9,272 gross longs and adding 142 gross shorts. Producers are net-short, but reduced that position by cutting more gross shorts than gross longs. Swap dealers are net-long and added to that position by increasing gross longs and cutting gross shorts.
In the legacy report, the silver net-long for non-commercials also decreased. They sliced 9,043 gross longs and cut 1,297 gross shorts. They are now net-long 27,816 contracts. Commercials are net-short, but reduced exposure by cutting gross shorts and adding a few gross longs.
The sharp drop in positions offers some comfort for bulls for the future, said HSBC. “The steep declines in net long speculative positions, particularly in gold and silver, leave room for long positions to rebuild and support prices,” they said.
Managed-money accounts in platinum decreased their net-long position. They are now net-long 20,243 contracts, having cut more gross longs than gross shorts. Non-commercials also reduced their net-long position, which now is 26,708 contracts, having cut gross longs and added gross shorts.
In palladium, the managed-money accounts cut the net-long position to 9,119 contracts. They cut gross longs and trimmed a few gross shorts to lower the net-long position. In the legacy report, non-commercials decreased gross longs and cut a few gross shorts, lowering their net-long to 10,379 contracts.
The copper net-long position for the managed-money accounts slipped to 13,615 contracts, as they have trimmed gross longs and hiked gross shorts. It was a different story in the legacy report. Funds slightly increased their net-long position, having added gross longs and cut a handful of gross shorts. They are net-long 11,567 contracts.
Barclays Capital said the “investor positioning” in the copper is far under the 2010 peak and shows “uncertain investor sentiment towards the macro environment. It does, however, suggest that should investors become more confident in economic growth prospects, there is room to express this through going long copper.”
For further information, see the CFTC’s website: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
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