Monday June 05, 2017 11:23
(Kitco News) - Momentum is building on itself in the gold market as hedge funds and money managers continue to add to their bullish positioning, driving the price closer to a key psychological level.

The disaggregated Commitments of Traders report for the week ending May 30 showed money managers increased their speculative gross long positions in Comex gold futures by 13,411 contracts to 175,304. At the same time, short bets increased by only 326 contracts to 51,171. Gold’s net length now stands at 124,133 contracts.

The gold market saw its net longs grow for the second consecutive week, increasing 11% from the previous week, which saw bullish positioning climb by 68%. The increased interest helped to push gold prices up 0.23% during the survey period.

According to analysts, funds continued to add to their gold positions as equities remain overextended in an environment of simmering geopolitical uncertainty, including ongoing turmoil in Washington D.C.

“Traders likely continued to favor the precious-metals complex into this week as political tensions grow and lackluster economic data in the U.S. sees the market get skeptical about future rate hikes. This will keep yields and the USD [U.S. dollar] lower, and provide incentive for the complex to remain long moving forward,” said Bart Melek, head of commodity strategy at TD Securities.

Looking ahead, with gold prices hovering below a key long-term trend line around $1,280 an ounce, Ole Hansen, head of commodity strategy at Saxo Bank, said that he could see the technical outlook attracting more investors. He added that momentum could push prices to $1,300 an ounce.

“Gold positioning is holding around its five-year average, so the market doesn’t look overbought at these levels,” he said. “Gold has plenty of room to move higher.”

The increase in buying interest also comes as the Federal Reserve prepares to meet to discuss monetary policy June 13 and 14. Markets have completely priced in a 25 basis-point hike following the meeting; however, analysts have noted that this could be a “dovish hike,” as the Federal could strike a cautious tone on future interest rate hikes.

However, compared to gold, hedge-fund interest in silver is lukewarm despite a rise in the metals speculative bullish positioning. Almost all of the gains last week were the result of short covering in the marketplace as funds reduced their short positions.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 2,313 contracts to 70,790. At the same time, short positions fell by 9,903 contracts to 28,714. Silver’s net length now stands at 42,076 contracts.

The short covering helped silver’s net length rise more than 40% from the previous week. The shift in positioning helped to drive prices up 1.7% during the survey period.

By Neils Christensen
For Kitco News