Hedge Fund Gold Positioning At Three-Month High – CFTC

February 8, 2016

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(Kitco News) – A mix of short covering and new investment interest from hedge funds and money managers helped to push speculative interest in gold and future prices to three-month highs, according to the latest data from the Commodity Futures Trading Commission (CFTC).

According to the disaggregated Commitment of Trader Report for the week ending Feb. 2, money managers increased their speculative gross long position in Comex gold futures by 4,821 contracts to 100,566. At the same time, short bets fell by 7,412 contracts to 71,530. The latest data shows the gold market is net long by 29,036 contracts.

Commodity analysts at Commerzbank noted that gold’s net length is now at a three-month high.

During the survey period, Comex April gold futures rose 0.6%, hitting a high of $1,131.50 an ounce. The latest data doesn’t include the latest push in gold, which saw prices break above its 200-day moving average for the first time since October. As of 9 a.m. EST, April gold futures were at $1,182.10 an ounce, up more than 2% on the day.

In an interview with Kitco News before the data was released Friday, Ole Hansen, head of commodity strategy at Saxo Bank, said that he would not be surprised to see continued growth in gold’s net length as global economic concerns have pushed expectations for Federal Reserve interest-rates hikes to basically zero for 2016. However, he added that investors should use caution at these levels.

“Gold’s net length is at a high enough level that there is a risk of profit taking among investors,” he said.

However, Bart Melek, head of commodity strategy at TD Securities, said that the new momentum in the gold market could end up attracting new investors to the marketplace.

“With Fed rate hikes all but priced out for 2016, the trend higher should continue for gold with aggressive ETF buying and momentum-chasing specs likely now starting to add to net long positioning in greater size,” he said.

George Gero, vice president and precious metals strategist for RBC Capital Markets, also sees potential for further growth in gold’s speculative net length as prices near the psychologically important $1,200-an-ounce level. He has noted several times that gold has been under-owned by hedge funds and the recent rally is helping to change that sentiment.

While the gold market has attracted strong investor interest, that sentiment wasn’t seen in the silver market, as its net length contracted last week. The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 335 contracts to 50,949. At the same time, short contracts rose by only 714 contracts to 25,932. The silver market’s net length now stands at 25,017 contracts.

During the survey period, Comex March silver futures fell 1.6%. However, like gold, the latest data doesn’t include last week’s rally, which saw prices drive above $15 an ounce. As of 8:57 am. EST, March silver futures were trading at $15.085 an ounce, up more than 2% on the day.

By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C

Category: Gold