Hedge Funds: Hedge Funds Hesitant on Gold

Hedge funds have reduced their focus on gold as the market for gold has become more turbulent.  The CFTC illustrated that money managers decreased their gross long positions.  Comex gold futures shrunk by 4,402 contracts to a total of 151,016.  Short bets fell by 2,148.  

Gold’s net length is now down two percent from last week.  Analysts expect that hedge funds will continue this trend and pull back from gold bets.  According to Ole Hansen of Saxo Bank, “What the market needs in the short term is to consolidate its strong gains. On that basis we see the potential upside above $2000 limited until the market gets used to and feels comfortable with the current levels. Given how far the market has travelled already this year, a correction could be relatively deep.”  Analysts at TD have expressed their concern with gold, stating that there has been a “bloated” momentum in the market.  Additionally, Commerzbank analysts claim that most funds are taking a “wait-and-see” approach.  Without the force of ETF demand, the gold price is unlikely to make any more significant gains. 

On the other hand, bullish interest has spiked in silver after weeks of decline.  Comex silver futures rose by 7,329 contracts to a total of 58,680.  Silver’s net length is up 34 percent from the previous week, at 32,257 contracts.  Similar to gold, however, gains for silver are short-lived.