Money Managers Up Gold Net Length But Cut Silver Positioning - CFTC Data

By Allen Sykora of Kitco News

Monday August 29, 2016 09:19

(Kitco News) - Large speculators upped their collective bullish positioning in gold futures but trimmed their net length in silver, according to the most recent weekly report released by the Commodity Futures Trading Commission.

The data covers the week to Tuesday, Aug. 23. During this period, Comex December gold fell to $9.90 to $1,341.40 an ounce, while December silver slid $1 to $18.92.

Net long or short positioning in the CFTC report reflects 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.

The commission issues two reports each Friday -- a so-called “legacy” report and a “disaggregated” report, started in 2009 and meant to offer more detail.

The disaggregated report shows that money managers upped their net-long, or bullish, positioning in gold futures to 253,684 contracts in the week to Aug. 23 from 242,727 as of the week before. There was an increase in fresh buying, as reflected by a rise of 7,398 total longs to 284,550. Also, there was short covering, or buying to offset a position in which somebody previously went short, or placed a bearish bet. This was reflected by a 3,559-lot decline in gross shorts to 30,866.

Speculators upped their net-long positioning as many in the market believed that a correction may have been overdone given continued ambiguity on the Federal Reserve’s interest-rate policy, said a research note from TD Securities.

“However, following developments (at a weekend Fed symposium) in Jackson Hole, gold specs may again start to cut their long exposure and build shorts in response to a growing narrative that that the U.S. central bank may be once again seriously considering a rate hike in 2016,” TDS continued. “Still, (with) the ever-present economic and system risks, along with the Fed skittishness when it comes to rising rates, investors are unlikely to get too extreme in their net-long position downward adjustments.”

Sean Lusk, director of commercial hedging with Walsh Trading, pointed out that some of this newfound net length may have been liquidated already as gold fell during the latter part of last week in the run-up to Fed Chair Janet Yellen’s speech Friday at Jackson Hole. Still, Lusk said, “there is still a sizeable long in this market that could come undone following next Friday’s (U.S. nonfarm payrolls) jobs number, should it exceed expectations.”

In silver futures, money managers cut their net long to 76,387 futures contracts as of Aug. 23 from 81,456 the week before. There was long liquidation, as gross longs declined by 1,891 lots to 96,876. In addition, there was also some fresh selling, as reflected by a 3,178 rise to 20,489.