Hedge Funds Buy Gold Following Dovish Fed, Increased Political Turmoil
New York (Mar 27) After two weeks of declines, investors waded back into gold investment waters, according to the latest trade data from the Commodity Futures Trade Commission.
However, some analysts note that speculative momentum remains muted.
The disaggregated Commitments of Traders report for the week ending March 21, showed money managers increased their speculative gross long positions in Comex gold futures by 9,080 contracts to 130,259. At the same time, short bets fell by 741 contracts to 74,064. Gold’s net length now stands at 56,195, contracts, up 21% from the previous week.
However, gold’s net length is down almost 80% from its record highs seen in July. During the survey period, gold prices rose 3.6% as prices hit a three-week high on March 21.
Gold jumped during the survey period after the Federal Reserve lifted interest rates by 25 basis points but left its outlook relatively unchanged. Analysts described the move as a “dovish hike.”
Bart Melek, head of commodity strategy at TD Securities, said that gold also found strong momentum on increased U.S. political turmoil. He added that this factor could continue to benefit the yellow metal.
“Rising doubts that President Trump will be able to deliver the anticipated simulative package also helped convince specs to add to long positions. With the Obamacare repeal failing this week, no fiscal stimulus any time soon should keep the Fed more measured regarding the pace of rate hikes and keep gold well supported in 2017,” he said.
In an interview with Kitco News, Ole Hansen, head of commodity strategy at Saxo Bank, said that investor sentiment is positive but not overly bullish.
“Positioning is quite light and that leaves room for additional upside but I think prices have to go higher to attract new money,” he said.
Hansen added that he expects funds to jump back into the market if prices can push above $1,265 an ounce.
While investors are turning modestly bullish on gold, they continued to take profits in silver. For the third consecutive week, silver’s speculative net length declined.
The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 1,668 contracts to 78,914. At the same time, short positions rose by 1,063 contracts to 14,129. Silver’s net length now stands at 64,785 contracts, a drop of 4% from the previous week.
However, the drop in the metal’s bullish speculative positioning didn’t have a major impact on prices as the rally in gold helped boost silver prices by 3.9% during the survey period, with prices pushing back above $17 an ounce.
Source: Reuters
