Hedge funds turn bullish on gold but remain heavily bearish on silver
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(Kitco Information) – Hedge funds have been fast to take income and canopy their brief positions within the gold market because the U.S. greenback seems to have topped out after hitting a 20-year excessive.
Not solely did a weaker U.S. greenback assist to shift sentiment within the gold market, however falling bond yields, as recession fears develop, have additionally supported the valuable metallic, in line with some analysts.
“The DXY index dropped 1.45%, the most important such weekly drop since July 2020, making the yellow metallic extra interesting. 10-year actual charges barely decreased by 6bp, reducing the chance price to carry non-yielding property reminiscent of gold,” mentioned commodity analysts at Société Générale in a word Monday.
The French financial institution famous that the gold market noticed $3.3 billion in bullish flows final week.
The CFTC disaggregated Commitments of Merchants report for the week ending Might 24 confirmed cash managers elevated their speculative gross lengthy positions in Comex gold futures by 5,602 contracts to 121,174. On the similar time, brief positions fell by 12,095 contracts to 60,117.
Gold’s web size now stands at 61,057 contracts, up almost 41% from the earlier week. The shift in speculative curiosity ended a five-week improve in bearish positioning. In the course of the survey interval, gold costs managed to push again above $1,850 an oz, however costs have stalled since final week’s transfer.
Some analysts have mentioned that gold’s current value motion isn’t a surprise; it was technically oversold after falling beneath $1,800 an ounce in mid-Might.
“Web-long publicity to gold futures have been trending decrease because the center of March. Nevertheless, each time it has pulled again to the 170-180k space, it has marked a low earlier than shifting greater as soon as extra. Two weeks in the past, it had fallen to 175k and moved greater to 183k contracts and costs have additionally risen. We, due to this fact, suspect the correction in oil is now full,” mentioned Matt Simpson, senior market analyst at Metropolis Index.
Nevertheless, not all analysts are optimistic that gold costs are prepared to maneuver greater, because the U.S. greenback might simply be experiencing a short-term correction.
Bart Melek, head of commodity analysis at TD Securities, mentioned that he nonetheless likes to promote rallies within the gold market because the Federal Reserve is predicted to aggressively fee rates of interest via the summer season.
“It must be famous that specs have loads of room to tackle new brief publicity and cut back lengthy positions,” he mentioned on Friday.
Whereas speculative sentiment within the gold market has turned bullish, hedge funds added to their bearish bets in silver.
The disaggregated report confirmed that money-managed speculative gross lengthy positions in Comex silver futures rose by 736 contracts to 41,545. Nevertheless, brief positions additionally rose by 1,922 contracts to 42,404.
Silver’s positioning is now web brief by 859 contracts. Web bullish positioning has fallen for six consecutive weeks. That is the primary time the silver market has been web bearish since earl-June 2019.
Nevertheless, the speculative positioning has not considerably impacted costs, with silver pushing above $22 an oz throughout the survey interval.
Analysts have famous that the silver market struggles as weak demand for base metals affect its industrial curiosity.
Some analysts have mentioned that copper costs must stabilize earlier than silver can discover a backside. This situation might quickly be within the playing cards as hedge funds lined their aggressive copper brief positions.
Copper’s disaggregated report confirmed money-managed speculative gross lengthy positions in Comex high-grade copper futures rose by 922 contracts to 41,616. On the similar time, brief positions fell by 5,483 contracts to 54,630.
The copper market’s web brief positioning now stands at 13,014.
In the course of the survey interval, copper costs managed to push above $4.30 a pound.
Nevertheless, commodity analysts at TD Securities warn that the economic metallic continues to be in a precarious state of affairs.
“On the floor, all methods are go along with risk-on, the broad-based greenback melting and Beijing easing Covid-19 curbs all supporting a restoration in LME metals costs. Behind the curtains, nonetheless, our gauge of metals provide danger has collapsed; our monitoring of Shanghai individuals reveals substantial promoting move from China’s high individuals in copper,” the analysts mentioned in a report Monday. “
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