Hedge funds cut bullish gold futures rates but buy enough ETFs

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(Kitco News) – Again, there is a growing divergence in the golden space as the hawk Federal Reserve expels hedge funds from their bullish speculative positioning; however, analysts note that the shift in speculative rates is offset by strong physical demand and growing interest in gold-backed exchange-traded funds.

The weekly disaggregated report on commodity futures traders’ commitments for the week ending March 29 found that managers lowered their speculative gross long positions in Comex gold futures by 6,103 contracts to 146,486. positions rose by 727 contracts to 38,184.

The net length of gold is now 108,302 contracts, which is almost 6% less than the previous week. The net length of gold has been declining for four weeks in a row, dropping to its lowest point since early February. At the time of the survey, gold prices remained in the wide range from 1950 to $ 1,900.

Analysts say hedge funds are eliminating their bullish rates as the Federal Reserve seeks to aggressively tighten its monetary policy. In the first half of this year, markets set prices in two increases of 50 basis points.

“The market expects to raise rates by 125 basis points at the next three Fed meetings and more than 200 basis points by the end of the year,” Commerzbank precious metals analyst Daniel Brisseman said Monday.

“The withdrawal of speculative financial investors is probably one of the reasons why the price of gold has fallen sharply from a high in early March and since mid-March has mostly kept on a sideways trend between $ 1900 and $ 1950: they have cut their net long positions by 24 % in the last three weeks of CFTC reporting, ”he added.

Commodity analysts Société Générale also noted that Russia’s comments on the de-escalation of the war in Ukraine have deprived the precious metal of the luster of a safe haven.

However, while hedge funds are reducing their exposure to the futures market, investors are accumulating various forms of paper gold and precious metals.

“ETF investors remain loyal to gold, on the other hand,” Bryzman said.

Analysts note that the demand for exchange-traded funds backed by gold has risen sharply, watching the inflow for the past 10 consecutive weeks.

Commodity analysts at European precious metals firm Heraeus said 7.7 million ounces of gold had entered ETF markets in the past 10 weeks.

“This was the longest series of weekly increases in ETF holdings from March to August 2020,” analysts said.

Investors also piled on physical metal. The U.S. Mint said it had sold 155,000 ounces of various denominations of its American Eagle Gold bullion coins, up 73% from last month. It was the best march for the Mint since 1999.

While gold continues to benefit from mixed investment sentiment in the market, silver suffers from a lack of conviction. Recent trading data shows that hedge funds are reducing all their risk to the precious metal.

The disaggregated report showed that speculative gross long positions in money-driven futures on Comex silver fell by 3,226 contracts to 5,4378. At the same time, short positions fell by 1,529 contracts to 12,247.

The net length of the silver is 42,131 contracts, which is almost 4% less than the previous week. The silver market experienced some short sales pressure during the survey, pushing prices to support just above $ 24 an ounce.

Analysts say that although silver looks good as a monetary metal, it can fight as a slowdown in global economic growth pulls on its industrial demand.

“Unlike gold ETFs, silver ETFs have been outflowing. Last week, holdings lost 3.0 [million ounces]. This led to a total outflow of 12.8 m3 in March, ”said Heraeus raw materials analysts. “If the price is to achieve further growth, it will take more interest from investors.”

Concerns about global growth do not affect all industrial metals equally. Last week, hedge funds increased their bullish rates in copper currencies.

Copper’s disaggregated report showed that speculative speculative long positions in high-quality futures on Comex copper rose 4,428 contracts to 70,677. At the same time, short positions fell 386 contracts to 29,983.

Copper’s net length is now 40,694 contracts, up 13% from the previous week. During the review period, copper prices kept critical support above $ 4.70 an ounce.

Analysts note that potential supply disruptions continue to support the industrial metal in the near future.

Disclaimer: The views expressed in this article are those of the author and may not reflect the views Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not an encouragement to make any exchange for goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article is not liable for damages and / or losses arising from the use of this publication.

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