Hedge Funds Continue to Pile Into Gold, Cut Short Bets In Silver

By Kitco News

Monday July 04, 2016 11:23

(Kitco News) - For the second consecutive week, hedge funds’ and money mangers’ bullish bets on gold and silver hit record levels, according the latest trade data from the Commodity Futures Trading Commission.

Hedge funds piled into gold and silver as global uncertainty gripped market sentiment after Britain voted to leave the European Union.

The disaggregated Commitments of Trader report (COT), for the week ending June 28, showed money managers increased their speculative gross long positions in Comex gold futures by 10,959,contracts to 285,895. At the same time, short bets rose slightly by 317 contracts to 24,845. The latest data shows the gold market is net long by 261,050 contracts.

Gold’s net length increased more than 4% from the previous week’s level.

During the survey period, gold prices rallied 4%, as prices pushed solidly above $1,300 an ounce and saw its biggest one-day move since the 2008 financial crisis.

With gold prices holding near two-year highs, commodity analysts at Commerzbank said that the strong positive sentiment among speculative investors is an indication that prices have enough momentum to move higher in the near-term.

Although the market looks a little over-extended, Joni Teves, strategist at UBS, said that the market is getting more comfortable with higher prices.

“With the macro story for gold more compelling than ever, the market may be starting to acclimatize to higher levels of net length. Many also recognize that in notional terms, the current value of gold positioning is still not as large as it was during the peak in 2011,” she said in a report Monday.

The latest CFTC data showed the silver market also saw a new record in speculative interest; however, the data shows a strong contrast to the gold market as the record was hit as a result of major short covering.

The disaggregated COT report showed money-managed speculative gross long positions in Comex silver futures fell 133 contracts to 87,541. At the same time, short positions fell by 2,217 contracts to 9,879. Silver’s net length now stands at 77,662 contracts.

Silver’s net length increased more than 2.6% from last week’s level.

During the survey period, silver prices rose 3% as the Brexit vote pushed prices briefly above $18 an ounce.