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Focus Money Managers Boost Gold Net-Long Exposure By 62%

Large speculators boosted their net-bullish positioning in gold futures by 62% during the latest reporting week for Commodity Futures Trading Commission data, yet one bank says the investment interest is still well below where it was for much of last autumn.

Buying of gold was helped over the course of the CFTC reporting week, which ended March 28, by a softer tone in equities and failure of the U.S. House Representatives to push through a new health-care law, analysts said.

During the week-long period to March 28 covered by the report, Comex June gold rose to $7.30 to $1,254.80 an ounce, while May silver climbed 66.5 cents to $18.215.

Net long or short positioning in the CFTC data reflect the difference between the total number of bullish and bearish 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 commission issues two reports each Friday -- a so-called “legacy” report and a “disaggregated” report, started in 2009 and meant to offer more detail.

As of March 28, the net-long position of money managers in the disaggregated report rose 62% to 91,043 futures contracts from 56,195 the week before. This was fueled by a combination of fresh buying (total longs rose by 20,620 lots) and short covering (total shorts, or bearish trades, declined by 14,228).

“Gold specs continued to add more long exposure last week…,” said a research note from TD Securities. “Equity markets sold off in the aftermath of the health-care bill failure and along with rising prices prompted specs to cover short exposure and take out newlong positions.

“Risk markets have since recovered, but gold has held firm as fiscal stimulus doubts linger, especially with the risk of a government shutdown looming overhead at the end of April if President Trump cannot pass a fiscal-stimulus bill. As long as the Fed continues to take a measured approach to future rate hikes, interest in the yellow metal should remain firm.”

Still, gold positioning on both the Comex market and for exchange-traded funds remains relatively “light,” said Citi Research. The bank commented that money-manager positioning of roughly 99,000 lots for futures and options combined is still roughly 60% below the average net-long position from the third quarter. Gold ETF holdings have climbed some 60 tonnes for the year to date but remain around 170 tonnes shy of the 2016 peak, Citi added.

Money managers’ net-long position in silver climbed by 25% to 81,170 futures contracts from 64,785 the prior week.

“As such, speculative financial investors contributed to the rise in the silver price to well over $18 per troy ounce,” Commerzbank said.

The increased net length was fueled largely by fresh buying, as the number of total longs rose by 14,086 lots. There was also a smaller amount of short covering, as reflected by a decline of 2,299 gross shorts

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