By Paul Ploumis (ScrapMonster Author)

April 05, 2016 02:36:30 AM

(Kitco News) - Interest in gold continues to defy expectations as hedge funds bought more of the yellow metal, pushing long speculative interest to a three-year high, according to the latest data from the Commodity Futures Trading Commission (CFTC).

The disaggregated Commitments of Trader report, for the week ending March 29, showed money managers increased their speculative gross long positions in Comex gold futures by 9,678 contracts to 184,135. At the same time, short bets rose by only 372 contracts to 29,930. The latest data shows the gold market is net long by 154,205 contracts.

However, the market continues to show signs of saturation as continued buying was unable to push prices higher. During the survey period, April gold futures lost 1% as it was unable to hold gains above $1,240 an ounce.

Some analysts noted that with gold’s net length at its highest point since October 2012, the market could be due for a correction in the short-term. Some market participants see the extreme positioning as a contrarian indicator.

Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, said in an interview with Kitco News on Friday that he is bearish on gold in the near term, specifically because of the extreme positioning in the COT report.

However, Stoeferle added that he is bullish on gold in the long-term as he expects the U.S. dollar’s bull market has topped out.

Alex Thorndike, senior precious metals dealer at MKS, agreed that the gold market appears over-extended and is due for a pullback.

“The growth of the longs is of some concern considering at the start of the year, we were sitting at around ~2.2 million ounces worth of net longs. The current net long now sits at ~23.7 million ounces,” he said. “We see the $1190-1200 zone as being critical, with a move through there likely to draw out more longs...”

While gold continues to attract investor attention, the same cannot be said for silver. The disaggregated COT report showed money-managed speculative gross long positions in Comex silver futures fell by 3,996 contracts to 60,154. At the same time, short positions rose by 6,285 contracts to 15,734. After hitting a three-year high, the silver market’s net length now stands at 44,420 contracts, down 18% from the previous week’s net length.

During the survey period May Comex silver prices fell 1.7%.

Courtesy: Kitco News