(Kitco News) - Funds increased their net bullish positions in precious metals futures and options contracts traded on Comex division of the New York Mercantile Exchange and the Nymex, making it eight straight weeks of gains for gold and platinum group metals, according to U.S. government data released Friday.
For the week ended Oct. 9, speculators in the Commodity Futures Trading Commission’s weekly commitment of traders report bumped up their net-long positions precious metals in both the legacy and disaggregated reports. Activity for copper was mixed.
Whether this trend can continue remains to be seen, given the way prices dove after the reporting period ended, analysts said. The price break may influence what speculators did with their positions. That data will be released at the end of the week.
Metals prices ended mixed during the reporting window of Oct.9, with gold, silver and copper prices down and platinum group metals higher. The most-active December gold contract dropped $10.60 to $1,765 an ounce as of Oct. 9. December silver fell 6.84 cents during the week to $33.985, while January platinum gained $8.10 to $1,695.30. December palladium rose $4 to $658.20. December copper dipped 8.30 cents to $3.7180 a pound.
Managed-money accounts increased their gold net-long position to 198,194 contracts in the disaggregated report, as new buying overwhelmed new short positions. Managed-money accounts added 2,624 gross longs and added 77 gross shorts. Producers remain net-short, bolstering that position by cutting a few gross longs and adding gross shorts. Swap dealers decreased their net-short position by cutting more gross shorts than gross longs.
Non-commercials in the legacy report also increased their net-long position by adding 5,332 gross longs and 977 gross shorts, similar to the action in the disaggregated report. They are now net-long 244,295 contracts. Commercials are net-short, but reduced exposure by slicing more gross shorts than gross longs.
Several market watchers are signaling some caution about gold’s short-term direction. The net-long position in gold remains heavy and prices are softening, and they say the possibility of long liquidation is increasing.
Analysts at Standard Bank said while speculators added to their bullish positions, the momentum behind the gains are beginning to slow. “It appears as though investors continue to question the ability of QE3 (third round of quantitative easing) to support prices and/or the longevity of Fed’s open-ended commitment to easing,” they said.
Barclays analysts noted that as funds continued to increase their net-long position, “gross short positions have risen for two straight weeks as gold has struggled to conquer the $1,800-an-ounce mark, and are now at a six-week high.”
The silver net-long position for the managed-money accounts rose slightly to 38,618 contracts. The rise came from adding 1,120 gross longs and 346 gross shorts, as the new longs were more than triple the new short positions. Producers are net-short but reduced that position by adding gross longs and cutting gross shorts. Swap dealers are net-short and trimmed their position by adding gross longs and cutting gross shorts.
In the legacy report, the silver net-long for non-commercials also rose. They added 1,205 gross longs and sliced 202 gross shorts, signifying the rise in the net position came mostly from new longs established. They are now net-long 44,355 contracts. Commercials are net-short, but lowered that position by cutting gross shorts and adding gross longs.
Managed-money accounts in platinum increased their net-long position. They are now net-long 35,009 contracts, having added many more gross longs than gross shorts. Non-commercials also raised their net-long position, which now is 46,190 contracts, having added gross longs and cut gross shorts.
In palladium, the managed-money accounts lifted their net-long position to 10,536 contracts. They added more gross longs than gross shorts to raise the net-long position. In the legacy report, non-commercials added gross longs and cut gross shorts, raising their net-long position to 12,822 contracts.
“Platinum, and to a lesser extent palladium, should continue to be supported by the strikes in South Africa. However, positioning in platinum is reaching extreme levels, so caution may be warranted,” said Anne-Laure Tremblay, precious metals strategist at BNP Paribas.
The copper net-long position for the managed-money accounts rose fell to 23,448 contracts, as they cut more gross longs than gross shorts. In the legacy report non-commercials increased their net-long position by cutting many more gross shorts than gross longs, lifting the net-long position to 11,819 contracts.
Regarding the rise in net-longs in the legacy report, Standard Bank said the “persistent increase in speculative length does not appear to be accompanied by persistently rising prices; this is worrying because it implies that a price rally could be sustained only if real demand follows.”
For further information, see the CFTC’s website: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
Follow me on Twitter! If you want to keep up with metals news and features, then follow me on Twitter. It's free, too. My account is @dcarlsonkitco .
By Debbie Carlson of Kitco News dcarlson@kitco.com
