(Kitco News) - Hedge funds liquidated their gold holding for the sixth consecutive week as the market continues to face headwinds from a stronger U.S. dollar and higher bond
yields.
Jonathan Butler, precious-metals strategist at Mitsubishi, noted in a report Monday that investors are fleeing safe-haven assets because of improving economic conditions in the U.S., which pushed 10-year bond yields to highs not seen since March.
The disaggregated Commitments of Traders report for the week ending Oct. 24 showed money managers decreased their speculative gross long positions in Comex gold futures by 3,854 contracts to 192,701. However, at the same time, short bets also declined by 2,707 contracts to 24,333. Ultimately, renewed selling pressure across the board caused gold’s net length to shrink, now standing at 168,368 contracts.
However, some analysts note that bearish momentum appears to be waning with gold’s net length down less than 1% from the previous week. The selling pressure has had only a modest impact on prices, which dropped 0.61% during the survey period. The metal’s bullish positioning has fallen more than 33% from the mid-September highs.
In a recent interview with Kitco News, Bill Baruch, head of Blue Line Futures, said he is bullish on the yellow metal because of speculative positioning in the marketplace. He added that there are signs the market is oversold.
“It will be difficult for gold prices to sustain a drop below $1,260 an ounce,” he said. “Ultimately, if you are a gold seller, you have already sold.”
The gold market remains extremely sensitive to ongoing speculation of who President Donald Trump will nominate to lead the Federal Reserve for the next four years. Bart Melek, head of commodity strategy at TD Securities, said that gold’s saving grace could be if former Fed Governor Jerome Powell gets the nod as he is seen as the less hawkish compared to the other frontrunner, Stanford economist John Taylor.
Melek added that investors could increase their gold holdings if geopolitical tensions in Europe and the growing conflict with North Korea escalates.
While the gold market continues to struggle to gain investor interest, silver is faring slightly better. For the third consecutive week, investors waded back into the marketplace.
The disaggregated report showed money-managed speculative gross long positions in Comex silver futures increased by 1,024 contracts to 74,898. At the same time, short positions fell by 214 contracts to 10,560. Silver’s net length now stands at 64,338 contracts.
Silver’s net length increased almost 2% from the previous week. However, the modest buying didn’t have a significant impact on the price, which dropped 0.44% during the survey period.
