Weaker Prices Prompt Fund Managers to Cut Precious Metals Positions In Latest CFTC Reports

Author: Paul Ploumis12 Aug 2014 Last updated at 03:35:43 GMT

(Kitco News) - For the second straight week, softer 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 Aug. 5.

Weaker prices also likely prompted these traders to cut positions in platinum group metals, too, although large speculators’ actions in copper were mixed.

Metals prices fell during the time period covered by the latest CFTC report. Comex December gold fell $15.20 to $1,285.30 an ounce. September silver slipped by 7.50 cents to $19.833. October platinum dropped $28.60 to $1,455.90 an ounce. September palladium fell $24.55 to $848.35. Comex September copper slid 1.45 cents to $3.2045 a pound.

Just as they did in the previous report, managed-money traders reduced their gold net-long position by selling long positions and buying short positions, a bearish move. This cut their net-long position to 104,111 contracts. This is the smallest net-long position since June 17. These traders cut 11,452 longs and added 6,529 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 also cut more gross shorts than gross longs.

The non-commercial traders in the gold legacy report mirrored the disaggregated report’s money managers’ activity. They cut 14,583 gross long contracts and added 6,316 gross shorts. They are now net-long 133,874 contracts, also the lowest since June 17. Commercials are net-short and cut that position by dropping more gross shorts than gross longs.

Traders at optionsXpress said the drop in the non-commercial’s gold position was by more than 20,000 contracts for the week “and demonstrates that gold bulls are not comfortable holding long positions despite rising political tensions.”

Looking at the disaggregated report, Koun-Ken Lee, analyst at Standard Chartered, noted the sizeable outflows from gold “came in the run-up to the European Central Bank’s rate decision as consensus expected rates to be kept on hold.”

Analysts at Barclays noted the current CFTC data does not cover the late-week rally gold enjoyed last week on safe-haven concerns. It’s likely tactical investors “increased their exposure to gold, but in our view, the recent uptick in prices is likely to be short lived, given broad investor interest has failed to follow through and physical demand is showing little sign of recovering significantly in the near term.”

Managed-money accounts in silver also trimmed their net-long positions on a combination of long liquidation and new shorts for the second straight week. They are net long 29,065 contracts, having cut 6,316 gross longs and added 6,317 gross shorts, pushing their net-long to the smallest since June 24. Producers decreased their net-short position and did so by cutting gross shorts and adding gross longs. Swap dealers cut their net-short position also by cutting gross shorts and adding gross longs.

In the legacy report, non-commercials mimicked the action in the disaggregated report by chopping 5,282 gross longs and adding 5,491 gross shorts to reduce their net-long position to 36,470 contracts. This is also the smallest since June 24. Commercials are net-short and decreased that position by adding gross longs and cutting gross shorts.

Bart Melek, head of commodity strategy at TD Securities, said speculators in silver reduced some of their “very high net-long positions as final technical supports gave way early in the week.”

Managed-money accounts in platinum decreased their net-long position to 37,837 contracts, following the action in gold and silver by cutting 4,039 contracts of gross longs and adding 398 gross shorts. Non-commercials in platinum reduced their net-long position to 46,951 contracts in the legacy report, having cut 2,642 gross longs and cut 958 gross shorts.

Large speculators’ net-long palladium holdings slipped in the disaggregated report to 16,806 contracts as they cut 1,578 gross longs and added 1,288 gross shorts. The palladium legacy report saw non-commercials trim 2,048 gross longs and add 1,480 gross shorts, lowering their net-long to 20,986 contracts.

Managed-money accounts cut their net-long copper position to 34,330 contracts, cutting 2,610 gross longs and adding 1,919 gross shorts. Large speculators bucked the trend of reducing net-long positions seen in the rest of the CFTC data by raising their net-long position, lifting it to 7,439 contracts. However, they achieved that by cutting 4,898 gross shorts versus only 1,707 gross longs.

“Copper specs (speculators) have gotten excited recently about improving U.S. and Chinese demand but prices have failed to break higher due to supply expectations leaving longs to exit, but some non-managed money specs appear to have thrown in the towel early too on the short side,” Melek said.

Courtesy: Kitco News