(Kitco News) – Gold bulls were put on the defensive after hedge funds increased their speculative long positions ahead of the Federal Reserve, according to the latest data from the Commodity Futures Trading Commission (CFTC).
The latest CFTC disaggregated Commitments of Traders report for the week ending Jan. 25 showed money managers increased their speculative gross long positions in Comex gold futures by 20,833 contracts to 140,640. At the same time, short positions fell by 8,749 contracts to 39,265.
Gold‘s net length now stands at 101,375 contracts, up more than 41% compared to the previous week. The prior week, gold bears were caught on the wrong side as market volatility and geopolitical uncertainty pushed prices to a two-month high above $1,850 an ounce.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold’s selloff, with prices dropping 3% by Friday, after the Federal Reserve monetary policy decision was partly due to the significant long positions.
Commodity analysts at TD Securities also noted that gold investors were caught on the back foot ahead of the Fed announcement. The Canadian Bank is tactically short the precious metal as it looks for prices to fall below $1,750 an ounce.
“With equity markets looking fragile and Fed hikes baked into the cake, investors began to wonder if the Fed would soften the tone, ultimately helping the yellow metal catch a bid heading into the meeting. But, to gold bulls displeasure, Chair Powell sounded a hawkish tone rather than opting to soothe the market,” said commodity analysts at TD Securities. “Moving forward, quantitative tightening will likely be the most impactful aspect of Fed policy for asset prices, and in this sense, the precious metal complex should continue to struggle to attract capital in the face of a hawkish Fed.”
Looking at the silver market, although the precious metal was dragged lower by gold following hawkish comments from the Federal Reserve, investor sentiment is slightly different, with prices being driven by money managers covering their short bets.
The disaggregated report showed that money-managed speculative gross long positions in Comex silver futures fell by 1,521 contracts to 51,622. At the same time, short positions fell by 5,224 contracts to 24,203.
Silver’s net length stands at 27,419 contracts, up almost 16% compared to the previous week.
Silver prices managed to push to a two-month high above $24.70 an ounce during the survey period. However, prices have fallen back into their long-term trading channel since then.
Although silver prices remain highly volatile, many analysts are bullish on the precious metal. They expect industrial demand to stay strong through 2022 as the push for more green energy technology ramps up.
Many analysts see significant potential for base metals like copper in the current environment, even as near-term speculative interest remains uninspiring.
Copper’s disaggregated report showed money-managed speculative gross long positions in Comex high-grade copper futures fell by 960 contracts to 60,854. At the same time, short positions fell by 1,334 contracts to 32,690.
Copper’s net length is currently at 28,164 contracts, increasing 1% from the previous week. During the survey period, copper prices continued to hold support around $4.40 per pound.