Hedge funds cut bullish gold price bets 60% since January
On Monday the gold price held above the crucial $1,150 an ounce support level – likely to be severely tested in two days time if the US central banks' Federal Open Market Committee pronouncements on rate hikes foresee a sooner-rather-than-later scenario.
The gold price closed below $1,150 during only two sessions in early November, but soon bounced back. For a sustained period of sub-$1,150 gold you have to go back to April 8, 2010.
Silver futures trended stronger on Monday with May contracts recovering to exchange hands at $15.60 an ounce in midday trade. Like gold, silver went off to the races at the start of the year to hit a 2015 high of $18.36 on January 22, but has since given up all its 2015 gains.
Gold is down more than $150 an ounce from its 2015 high above $1,300 hit in January and the precious metals' decline since then is evident in the futures positioning of large investors like hedge funds or so-called "managed money".
In the week to March 10 according to the Commodity Futures Trading Commission's weekly Commitment of Traders data bullish positioning was trimmed for the sixth week in a row.
Hedge funds increased short positions on gold – bets that prices will fall – by 34.6% and cut long positions at the same time, reducing the net long position by 26% to 6.5 million ounces. That's more than 60% below January's bullish positioning.
Silver positioning also turned bearish last week with speculators adding 32% to short positions and scaling back longs for a net long position of 77.8 million ounces.
Like the price of silver, speculation in silver futures tend to be volatile. Hedge funds had to cover a net short position of 53 million ounces in October last year after pushing longs to a record of 234 million ounces only three months earlier.
It's not only precious metals that have fallen out of favour with hedge funds.
Large scale futures investors cut bullish exposure to 24 commodities by 26% during the week. Across all sectors – from soybeans and diesel to lean hogs and palladium – net-long were run down to just 334,000 lots of futures and options.
That's down from 2.1 million net long positions a year ago and the worst outlook since the height of global financial crisis six years ago according to data from Bloomberg and Saxo Bank.
Image by Tom Woodward