Large investors, retail buyers abandon gold market
On Monday gold futures managed to eke out modest gains after four straight weekly declines on the back of a rampant dollar and a paucity of safe-haven buying despite ongoing geopolitical troubles in the Middle East.
In early afternoon trade on the Comex division of the New York Mercantile Exchange gold for December delivery was changing hands for $1,218 an ounce, up less than $3 an ounce compared to Friday's closing price.
Sentiment on the precious metals markets soured in September with both large investors and retail buyers abandoning the sector.
The third quarter is likely the sixth quarter in a row holdings in global exchange traded funds backed by physical gold have seen a reduction.
After outflows last week of just under 8 tonnes, dropping total holdings to 1,688 tonnes, September is shaping up to be the worst month for ETF funds since December last year.
Overall gold bullion holdings are now at five year lows and a whopping 950 tonnes below the record 2,632 tonnes or 93 million ounces reached in December 2012.
Despite an even worse price performance, with the metal falling to four-year lows of $17.27 an ounce last week, retail investors in silver have continued to pump money into silver-backed ETFs.
Last week silver funds added 143.5 tonnes, bringing total holdings to 20,061 tonnes, just 60 tonnes shy of the all-time record set in 2013.
Like ETF investors, speculators in gold and silver futures and options turned more bearish last week, slashing long positions – bets that prices will go up – and adding bearish shorts at the same time.
Bullish bets on gold – net long positions held by large investors like hedge funds – fell by 20%, in the week to September 23 according to Commodity Futures Trading Commission data released after the close of business on Friday – the lowest point this year.
On a net basis hedge funds hold 44,265 gold lots or 4.4 million ounces, a 10 million ounces cut from the the year high of 144,272 lots.
Silver price speculators moved further into a net short position, marking a dramatic reversal in sentiment towards silver by large investors or so-called managed money, falling to a 4,894 net short position from record longs of 46,795 or 240 million ounces in June.
The bigger commodities picture is also dim with overall exposure by hedge funds to 24 commodities that range from WTI Crude to soybeans to lean hogs falling to levels last seen at the height of the financial crisis in early 2009.
Only cocoa futures are attracting bullish bets of any significance and that's due to the ebola epidemic sweeping the main producing region of west Africa.
Image by beckycaplice