(Kitco News) – The gold market appears to be building a solid base as price continues to rise even as bullish speculative interest among hedge funds starts to slow, according to the latest trade data from the Commodity Futures Trading Commission.
The CFTC’s disaggregated Commitments of Traders report for the week ending March 26 showed money managers decreased their speculative gross long positions in Comex gold futures by 9,582 contracts to 163,006. At the same time, short positions also fell, dropping by 2,481 contracts to 27,211.
Gold is now net long 135,795 contracts. Although speculative positioning has remained relatively unchanged in the last two weeks, this is the first decline in speculative positioning since late February, just before gold started its record run
During the survey period, gold prices managed to hold initial support at around $2,200 an ounce. Since then, prices have continued to push higher into blue-sky territory. June gold futures last traded at $2,261.90 an ounce, up 1% on the day.
The gold market is seeing new momentum after U.S. Personal Consumption Expenditures data showed that inflation does not appear to be a major concern as markets look for the Federal Reserve to start its easing cycle in June. Markets were closed Friday for the Easter holiday, so this is the first time investors have a chance to react to the inflation numbers.
In a recent comment to Kitco News, Ole Hansen said that the latest rally in gold will help alleviate fears that the market is losing momentum, which could cause speculative investors to take more of their bullish bets off the table.
“Gold’s continued ability to withstand headwinds from dollar and yield movements is nothing but impressive, and it highlights a market that continues to attract demand, making it a relatively easy task for hedge funds to defend their huge long positions,” he said. “My main concern during the past couple of weeks has been the risk of weakness forcing a cascade of long liquidation, but with prices now above $2,200 that risk continues to fade.”
Although gold is looking a little overextended as a speculative asset, many analysts note that the precious metal remains unloved by the broader market.
“This quiet rally is extremely encouraging for gold investors,” said Adam Button, chief currency strategist at Forexlive.com, in a recent interview. “This is not an exhausted bull market. The time to sell is when everyone is talking about gold, and the miners are taking off.”
Analysts note that there are broader factors in the marketplace that will continue to support speculative interest. The gold market continues to see insatiable demand in emerging markets, led by Asian investors.
Gold pushing new all time highs despite broad hatred in the US, higher dollar, and tighter dollar US monetary policy expectations suggests the surge in demand is from abroad, particularly China.
Gold price is rising even as US ETF assets keep falling: pic.twitter.com/MmJcKVku3V
— Bob Elliott (@BobEUnlimited) March 5, 2024
While the gold market has seen consistent demand, silver has struggled significantly.
The disaggregated report showed that money-managed speculative gross long positions in Comex silver futures rose by 387 contracts to 53,871. At the same time, short positions rose by 7,570 contracts to 23,932.
Silver’s net length now stands at 29,939 contracts, down sharply from the previous week. During the survey period, silver prices tested initial support at $24.50 an ounce.
Prices have recovered since last week but are struggling to hold gains above $25 an ounce.
Silver prices have solidly underperformed gold, with the gold-silver ratio holding above 89, trading near a three-week high.
Although many retail investors see incredible potential for the white metal, some analysts have said it could struggle as it is not considered a significant safe-haven asset.
Last week, Darin Newsom, Senior Market Analyst at Barchart, said that when push comes to shove, gold remains the go-to safe-haven asset as it is backed by unprecedented central bank demand.
However, silver, because of its industrial uses, which make up about 50% of demand, remains an important inflation hedge. Newsom said that easing economic uncertainty and elevated inflation remains the best environment for silver.
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