Fed tests gold upleg
Gold’s outlook and fundamentals remain really bullish.
After a dismal week capped by Friday’s stronger than expected US jobs report that sent the gold price towards its 2015-lows, the metal took a breather on Monday.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery – the most active contract – inched up $3.30 to $1,171 an ounce from Friday’s close.
Speculators on the futures market positioned themselves for last week’s weakness with large investors such as hedge funds, referred to as “managed money”, building up short positions in the week to June 2 according to the Commodity Futures Trading Commission’s weekly Commitment of Traders data.
Gold shorts – bets that gold could be picked up at a cheaper price in the future – have been building up in recent months reaching 6.3 million ounces last week, up more than 18% or nearly 1 million ounces in three weeks.
That compares to 7.7 million in March when gold was hitting lows for 2015 of around $1,150 and the record-breaking short positions reached above 8 million ounces going into 2014. That December 2013 short position was the highest since 2007, back when gold changed hands for $700 an ounce.
On a net basis hedge funds are now long 6.9 million ounces, nearly 10 million ounces below levels hit in January this year. In January hedge funds built up the largest bullish position since December 2012 when gold was changing hands for more than $1,700 an ounce.
Today’s speculative positioning remains much more bullish compared to the 3.1 million ounces position held mid-March however.
Platinum investors were even more bearish, adding massively to short positions and cutting back slightly on longs. Overall net longs were cut by more than 30% with hedge now holding a measly 640,000 ounces.
Palladium enjoyed a small 180,000 ounce bounce in bullish bets to the equivalent of 1.6 million ounces, but silver longs were also slashed, falling 12% from the week before.
Net longs in silver is a healthy 182 million ounces. In July last year bullish bets in silver peaked at record longs of 46,795 or 234 million ounces.
Image of open outcry commodities trading at the Chicago Board of Trade in 1988 by Greg Wass
