Money managers likely rebuilding bullish gold positioning after declines

Since, however, gold prices have risen again, a sign that money managers likely have started to rebuild their bullish gold positions, analysts said.

During the week-long period to March 3 covered by the last CFTC report, Comex April gold fell by $5.40 to $1,644.40 an ounce, while May silver tumbled by $1.08 to $17.188.

Gold prices since regained their footing as equities remained on the defensive and U.S. Treasury yields hit record lows as markets fretted over the economic ramifications of the coronavirus. Spot gold popped over $1,700 overnight for the first time since late 2012. As of 9:44 a.m. EDT, April gold was trading at $1,681.70, putting the contract up by $37.30 since the cut-off date for the last CFTC data.

“In combination with continued equity-market volatility, the fierce decline in interest rates saw capital seek gold's warm embrace and saw the yellow metal hit new highs once again,” TD Securities said in a research note. “We suspect that positioning could remain significantly elevated going forward, notwithstanding the potential for sharp short-term corrections in gold driven by liquidity-seeking behavior.”

Meanwhile, Commerzbank analyst Daniel Briesemann pointed out that holdings of gold by exchange-traded funds rose by the most since mid-2019 on Friday to hit a record high.

“And speculative financial investors are also likely to have bought gold again in the last few days, thereby contributing to the price rise, after having reduced their net-long positions in the past two weeks…,” he said.

Phil Flynn, senior market analyst with at Price Futures Group, also figures gold net length is building again after traders earlier had to “liquidate everything” to raise money when other risk assets were tumbling.

“People are looking for places to park money,” Flynn told Kitco News.

Net long or short positioning in CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.

The CFTC’s “disaggregated” report showed that money managers trimmed their net-long position to 215,361 futures contracts as of March 3 from 230,846 the prior week, which in turn had been a reduction from 238,546 the week before that. The most recent decline was long liquidation, as gross longs fell by 20,297 lots and outpaced the short covering (decrease of 4,812 total short positions).

“Gold saw sharp liquidations to end the [CFTC reporting] week, as money managers sought to sell their winners to raise liquidity for their losers amid an equity-market correction, triggering a significant pullback in the yellow metal,” TD Securities said.

Money managers more than halved their their bullish stance in silver to a net long of 28,971 futures contracts, down from 61,689 the week before. The majority of the decline was long liquidation, as total longs fell by 28,980 lots. There was also some fresh selling, as short positions rose by 3,738.