Bullish Gold Positioning Nudges Slightly Higher - CFTC Data

By Allen Sykora of Kitco News

Monday May 23, 2016 11:05

(Kitco News) - Large speculators pushed their heavily bullish position in gold futures slightly higher in the most recent weekly positioning data released by the Commodity Futures Trading Commission.

During the week-long period covered by the report – through May 17 -- Comex June gold rose $12.10 to $1,276.90 an ounce. July silver rose 15.8 cents to $17.25.Gold Price

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.

Commerzbank pointed out in a research note that the data suggest that speculative financial investors are “remaining loyal to gold.”

The net-long position of money managers in the CFTC’s disaggregated report shows that these accounts upped their net-long, or bullish, position slightly to 212,441 futures contracts from 211,191 the prior week. This was largely due to short covering, as reflected by a decline of 973 lots in the number of total shorts. The number of gross longs rose by 277.

Some observers, however, point out that the decline in gold prices since last Tuesday’s cutoff for the most recent CFTC data suggests that net length may have narrowed since, as some longs are likely to have either booked profits or exited trades. MKS (Switzerland) S.A. cited investment-bank research showing that the number of open positions in gold futures declined during the latter part of last week as gold prices also eased. This is generally seen as a sign that some speculators with long positions have exited from their bullish gold trades.

And, some argue, this could ultimately improve the health of the market.

“There’s no doubt about it,” said Sean Lusk, head of commercial with Walsh Trading.

He later added, “The market probably got a little overcooked to the upside here….Longs had the profits and they had the risk (of seeing those profits eroded). They probably took some off the table here.”

The key going forward, he added, may well be the U.S. dollar. The greenback has been recovering lately, and if this continues, could prompt further selling by traders who have gold longs and opt to book profits while they have them, Lusk said.

Meanwhile, net-long positioning among money managers in silver declined to 68,198 futures contracts from 72,940 the week before due to a combination of long liquidation and fresh selling. The number of gross longs fell by 2,363 lots, while the number of gross shorts increased by 2,379.

By Allen Sykora of Kitco News; asykora@kitco.com