Hedge Funds Bail Out Of Recent Bullish Gold Positions

(Kitco News) – Sentiment remains extremely volatile in the gold market as hedge funds liquidated most of their newly acquired bullish positions and added to their bearish bets, according to the latest trade data from the Commodity Futures Trading Commission.

“Recently established gold longs got squeezed once again with quarter-end dollar demand and what turned out to be a temporary easing of geopolitical risks helped reduce its appeal,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The CFTC’s disaggregated Commitments of Traders report for the week ending April 3, showed money managers reduced their speculative gross long positions in Comex gold futures by 27,490 contracts to 155,590. At the same time, short bets rose by 8,031 contracts to 28,948. Gold’s net length currently stands at 126,642 contracts.

While gold’s net length decreased almost 22% from the previous week, the price dropped less than 1% during the survey period. Analysts note that gold has been caught in a narrow trade range between $1,300 and $1,350 for nearly three months. Many analysts have described the marketplace as a trader’s market as they buy support and sell resistance levels.

Commodity analysts at TD Securities said that easing global trade tensions caused hedge funds to reduce their bullish bets in gold; however, they added that volatility in equity markets should help to support the yellow metal in the near term.

“With equity markets dropping sharply late this week and trade risk re-emerging along with weak US jobs data, it is likely that prices may move up more and we should see length grow as well,” they said.

Hansen said that he expects gold to continue to struggle as silver significantly underperforms in the precious-metals sector. He noted that bearish bets on silver hit a new record, according to the latest trade data.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 1,506 contracts to 33,494. At the same time, short positions increased by 7,580 contracts to 73,832. Silver’s net-short positioning now stands at 40,338 contracts.

Silver’s bearish positioning increased almost 18% from the previous week; prices dropped close to 1% during the survey period.

Many analysts say that the bearish sentiment in silver is unstainable and is significantly oversold.

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