Hedge funds continue to sell gold but sentiment is changing

Hedge funds continue to sell gold but sentiment is changing

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(Kitco News) – The latest data from the Commodity Futures Trading Commission (CFTC) shows that hedge funds continue to reduce their bullish exposure to gold; Analysts, however, noted a shift in sentiment as prices bounced off the support below $1,800 an ounce.

In an interview with Kitco News, Peter Grosskopf, CEO of Sprott Inc, said that gold is set to rebound higher in the near term as bearish sentiment moves near extreme levels.

“Gold has been fading significantly, so I am comfortable saying the price should go higher as sentiment turns to the upside,” he said. “Gold continues to do its job and is once again a neglected risk-averse asset.”

The CFTC’s Detailed Commitments of Traders Report for the week ending May 10 showed that money managers reduced their total speculative long Comex gold futures positions by 8,359 contracts to 123,931. Meanwhile, short positions increased by 10,273 contracts to 72,212 contracts.

Gold now has a net length of 43,360 contracts, down 30% from the previous week. Gold net length fell to an eight-month low. During the survey period, gold prices fell to a four-month low of $1,785 before rebounding higher.

“According to CFTC statistics, speculative financial investors withdrew more…, reducing their net long positions to the lowest level since last September,” said Daniel Pressman, precious metals analyst at Commerzbank. “But in our view, this should now have adjusted the market, which means that the selling pressure generated by this group of investors should have eased significantly.”

However, some analysts are not convinced that the gold market has bottomed out.

“Going forward, with the Fed appearing to be willing to sacrifice some economic growth in an effort to tame inflation, the path of least resistance for gold remains lower,” analysts at TD Securities said.

While sentiment shifts, the gold market still faces some technical hurdles to overcome, said Ole Hansen, head of commodity strategy at Saxo Bank.

“For gold, in order to become more investor friendly, it will need to break the next big hurdle at $1,868, which is the 38.2% retracement of the recent $210 retracement,” he said.

The strong selling pressure in the silver market also appears to be easing.

The detailed report showed that total speculative money-managed long positions in Comex silver futures declined by 947 contracts to 40,809 contracts. Meanwhile, short positions rose by 2,466 contracts to 40,482 contracts.

Silver’s net length was 327 contracts, down 82% from the previous week. During the survey period, silver prices fell below $21 an ounce before rebounding higher.

There is less conviction that silver, as bottom as uncertainty, continues to dominate the base metals, affecting industrial demand for silver. Copper net positions are still bearish.

A detailed copper report showed that speculative money-managed long positions in Comex’s high-quality copper futures contract decreased by 4,553 contracts to 40,694 contracts. Meanwhile, short positions rose by 4,081 contracts to 60,113.

The copper market is net selling 19,419 contracts, relatively unchanged from last week. During the survey period, copper prices fell below $4.20 per pound but bounced back from their lows.

However, increasing uncertainty surrounding the global economy is weighing on the base metal, according to some analysts.

“While improved risk appetite has helped lift markets, copper remains in a precarious position with growing global macro anxiety, while Chinese shutdowns continue to hamper growth and the effectiveness of stimulus proposals,” said analysts at TD Securities. “In this context, the base metals trading system has turned into a bullish selling system.”

Not giving an opinion: The opinions expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to conduct any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will be liable for losses and/or damages arising from the use of this publication.

2022-05-23 21:03:00

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