Funds trim net-bullish gold positioning but increase silver net length

Money managers trimmed their net-bullish positioning in gold futures modestly – but hiked the silver one – during the most recent reporting week for data compiled by the Commodity Futures Trading Commission (CFTC).

During the week-long period to March 31 covered by the last CFTC report, June gold lost $66.70 to $1,596.60 an ounce, while May silver slipped 10.1 cents to $14.156.

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 in gold to 152,598 futures contracts from 157,409 the week before. The decline was due to a combination of long liquidation (gross longs fell by 2,145 contracts) and fresh selling (gross shorts rose by 2,666 lots).

“The surge in the USD [U.S. dollar], as many fund mangers sold risk assets to fund redemptions and cover margins, contributed to a heavy reduction in gold longs,” said a research note from TD Securities. “Continued volatility in the gold market and a blowout in the physical-futures differentials also prompted money managers to aggressively cut their long exposure and their participation in the futures market.”

Commerzbank analyst Carsten Fritsch pointed out that the decline in net length among futures traders comes at a time when investors have been piling into gold exchange-traded funds. For the week ending Friday, gold ETF holdings rose by 47 metric tons.

“Speculators are remaining reticent, on the other hand; net-long positions stagnated at a comparatively low level for the third week in a row,” he said.

Meanwhile, money managers upped their their net-bullish stance in silver to a net long of 17,974 futures contracts from 14,011 the week before. The rise was mostly due to short covering, as gross shorts fell by 3,795 lots. There was a modest increase of 168 total longs.