Fund Managers Cut Gold, Silver Positions In Latest CFTC Reports

(Kitco News) - Weaker prices likely spurred large speculators to reduce their net-long gold and silver futures and options holdings on the Comex division of the New York Mercantile Exchange in the latest Commodity Futures Trading Commission data for the week ended July 29.

In this latest round of disaggregated and the legacy reports from the CFTC, large speculative traders reversed the modest rise in gold positions from the previous week. Meanwhile, this is the second week these traders reduced their bullish silver holding.

In the platinum group metals, activity was mixed. Large speculators cut bullish copper positions for the second straight week in both reports.

Metals prices mostly fell during the time period covered by the latest CFTC report. Comex December gold fell $7.50 to $1,300.50 an ounce. September silver has slipped by 42.50 cents to $20.583. October platinum dropped $3.80 to $1,484.50 an ounce. September palladium bucked the trend and rose $3.45 to $872.90. Comex September copper slid 1.1 cents to $3.2190 a pound.

Managed-money traders' gold net-long position fell on a combination of selling long positions and buying short positions, a bearish move, reducing their net-long position to 122,092 contracts. This is the smallest net-long position since June 24. These traders cut 9,039 longs and added 4,989 gross shorts. Producers' net-short position fell as they cut more gross shorts than gross long positions. Swap dealers' net-short position fell as they added gross longs and cut gross shorts.

Koun-Ken Lee, analyst at Standard Chartered, noted the strength of the U.S. dollar is bearish for commodities as a whole, but particularly for precious metals.  Aakash Doshi, analyst at Citi Research, concurred. The "outlying risk for gold is if the U.S. dollar continues a sharp rally as it did last month," he said.

The non-commercial traders in the gold legacy report took the same tack as did the disaggregated report's money managers. They cut 9,298 gross long contracts and added 2,625 gross shorts. They are now net-long 154,773 contracts, also the lowest since June 24. Commercials are net-short and cut that position by dropping more gross shorts than gross longs.

"This latest data represent only the third time in two months in which net speculative length has fallen; net non-commercial positioning remains nearly twice that seen at the end of May," said analysts at Barclays.

Bart Melek, head of commodity strategy at TD Securities, said, speculators likely trimmed their net-long positions when geopolitical tensions subsided.

As in gold, managed-money accounts in silver trimmed their net-long positions on a combination of long liquidation and new shorts. They are net long 41,699 contracts, having cut 3,542 gross longs and added 981 gross shorts, pushing their net-long to the smallest since July 1. Producers decreased their net-short position and did so by cutting gross shorts and adding gross longs.  Swap dealers cut their net-short position by adding more gross longs than gross shorts.

In the legacy report, non-commercials cut their net-long silver position by chopping 4,204 gross longs and 439 gross shorts to reduce their net-long position to 47,242 contracts. This is also the smallest since July 1. Commercials are net-short and decreased that position by adding gross longs and cutting gross shorts.

"Silver tracked weaker along with gold and specs (speculators) got a little uncomfortable approaching historical positioning high," Melek said

Managed-money accounts in platinum increased their net-long position to 42,274 contracts, but did so by short covering. Gross longs fell 470 contracts, but gross shorts fell 1,202 contracts, offsetting the reduced gross longs. Non-commercials in platinum saw the opposite happen as they reduced their net-long position to 48,637 contracts in the legacy report, having cut 1,146 gross longs and cut 811 gross shorts.

Large speculators' net-long palladium holdings slipped in the disaggregated report to 19,672 contracts as they cut 398 gross longs and added 443 gross shorts. The palladium legacy report saw non-commercials add 549 gross longs and 105 gross shorts, slightly raising their net-long to 24,513 contracts.

Managed-money accounts cut their net-long copper position to 38,859 contracts, cutting 5,792 gross longs and 544 gross shorts. In the legacy report, large speculators reduced their net-long nearly in half from the previous report, to 4,248 contracts, having cut 6,403 gross longs and 1,828 gross shorts.

Citi's Doshi said the report reflects the caution some investors have to large visible Asian copper stocks in exchange warehouses. However, he said, "subsequent the COT (commitment of traders) cut-off date, positive manufacturing PMI (purchasing managers index) data for both the USA and China should have provided some degree of positive sentiment towards copper from an investor perspective. However, last week's equity market sell-off driven by a combination of gloomy corporate news, geopolitical concerns, and Argentina's debt default, did weigh on Dr. Copper, with LME (London Metal Exchange) prices closing last week down over $50/MT, pointing to continued long liquidation by money managers that could be reflected in the next … report."

For further information, see the CFTC's website.

Courtesy: Kitco News