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Specs’ Bullish Gold Posture Soars 153%; Net Long Again In Silver

Kitco News

 (Kitco News) - The bullish positioning in gold futures by large speculative accounts rose by 153% in the aftermath of scaled-back expectations for future monetary tightening by the U.S. Federal Reserve, based on the most recent data from the Commodity Futures Trading Commission.

Meanwhile, silver speculators swung from a net short, or bearish, position to a net long, or bullish posture.

During the week-long period through July 25 covered by the report, Comex December gold rose $9.70 to $1,258.50 an ounce, while September silver added 27.4 cents to $16.542.

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.

 “Gold and silver specs both bounced off recent lows as the massive amounts of shorts were forced to cover, and as new longs entered as well,” said TD Securities.

The precious metals caught a bid from a “lackluster” U.S. Consumer Price Index, the inability of the Trump administration to push through measures like a health-care bill, a weaker U.S. dollar and market-set interest rates, TDS said. This forced traders to buy in order to cover short positions, particularly after the latest Federal Open Market Committee statement was interpreted as dovish by the market, TDS continued.

Money managers’ net-long, or bullish, position in the disaggregated report rose to 73,624 contracts from 28,913 the week before. While there was fresh buying, as reflected by a 9,331 increase in total longs, the bulk of the increase was buying by traders to exit short positions. The number of gross shorts fell by 35,380 lots.

“The Comex August-December roll is now out of the way and may remove some of the support from the market, while the latest COTR [Commitment of Traders report] shows an increase in gold positioning, largely a result of short covering,” said Sam Laughlin, senior trader of precious metals with MKS (Switzerland) S.A.

The increase in gold prices after the July 25 cut-off date for the most recent CFTC data suggests that speculators’ net-long positioning has grown even larger, pointed out analysts at Commerzbank. Early Monday, Comex December gold got as high $1,277.30 an ounce, its strongest level since the middle of June.

Meanwhile, in silver, money managers reversed to a net-long position of 8,220 contracts from a net short of 7,086 the week before. This was also largely due to short covering, as the number of total shorts fell by 12,168 contracts. Gross longs climbed by 3,138.

“Although some shorts covered [in gold and silver] this week, the short positioning remains aggressive, especially in silver,” TDS said. “Considering that silver prices have yet to respond to the positive precious-metals environment in the same manner as gold, despite historically being more volatile, we continue to favor silver over the yellow metal.”

By Allen Sykora

For Kitco News

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