Money Managers Continue To Increase Their Short Bets In Gold, Silver – CFTC

By  Paul Ploumis 14 Jul 2015  Last updated at  03:35:08 GMT

(Kitco News) - Pessimism in the gold market continues to grow as money managers exit their long positions and push their short bets to near-record levels, according to the latest data from the Commodity Futures Trading Commission (CFTC).

According to the disaggregated Commitment of Traders Report (COTR), for the week ending July 7, money-managed speculative gross long positions of Comex gold futures fell by 3,706 contracts to 111,482. At the same time, short-sellers added to their positions by 9,818 contracts to 109,383. Gold's net length now stands at 2,099 contracts.

Commodity analysts noted Monday that gold's net length is now at its lowest level since November; at the same time, silver gross shorts, at 100,000, are near record highs.

It was a wild ride for gold prices last week as the yellow metal was caught in a wave of broad-based selling in commodities during the survey period. Comex August gold period ended up losing almost 1.7% and closing the five-day period at its lowest level since March 17.

Although investors are seeing increased short positioning in the marketplace, some analysts don't expect to see any significant short-covering rally in the near-term.

"In our opinion, the growing pessimism displayed by money managers will prevent precious metal prices from making any kind of noticeable recovery in the near future," Commerzbank said in its report.

"Gold is looking weak from a technical standpoint and has failed to garner support from safe-haven buying while the physical market looks weak," said Barclays analysts, also in a report published Monday.

However not all analysts are convinced that gold can't benefit from some shifting sentiment.

"We feel that the extended short positioning should keep down-side action fairly limited for the short term," said Alex Thorndike, senior precious metals dealer at MKS. He added that they are expecting prices to hold initial support between $1154-55 and $1147 - last Wednesday's low and long-term support at $1143 – the 2015 low.

Analysts at UBS noted some differences in the gold market now compared to November, the last time net speculative positions were at current levels.

"Firstly, sentiment last November was noticeably more bearish than it is currently. While some concerns linger – mostly around gold's performance amid a rising rate environment and a stronger dollar – the overall mood is more neutral, with many market participants of the view that gold appears to be finding equilibrium around recent ranges," they said in a research report.

They added that in the last eight trading session from mid-October to early November, gold prices dropped about 8%, "whereas gold is down less than 1% so far today and instead has generally been drifting lower in a more orderly fashion over the last couple months," they said.

Negative market sentiment also rules silver, as the CFTC data shows investors continue to expand their short positions, overwhelming any buying interest. The disaggregated COTR showed money-managed speculative gross long positions of Comex silver futures rose by 158 contracts to 44,311. At the same time, short contracts rose by 2,085 contracts to 56,859. The silver market is now net short 12,548 contracts. Analysts at Commerzbank note that this is now a record for silver.

Silver prices went on an even wilder ride during the survey period. During the five-day timeframe, silver actually showed a gain of more than 1%, but that was quickly reversed, with prices falling 6.3% and then bouncing off their lows and ending down around 4%.

UBS notes that the strong gains on the short side could create some upside risk for the precious metal "and given its tendency to overdo a move in gold, could suggest some downside in the gold:silver ratio may be in store up ahead."

Courtesy: Kitco News