Speculators slashed their net-long positions in gold and silver futures and options traded on the Comex division of the New York Mercantile Exchange following a steep drop in prices, according to U.S. government data released late Friday.
For the week ended Nov. 12, speculators in the Commodity Futures Trading Commission's weekly commitments of traders report saw their net-long positions in gold and silver drop significantly in both the legacy and disaggregated reports. In copper, speculators turned net-short for both reports; however, activity by funds was mixed in the platinum group metals.
Metals prices during the week covered by the report were lower. December Comex gold fell $36.90 an ounce to $1,271.20 as of Nov. 12, while December silver lost 85.8 cents to $20.778. Nymex January platinum slid $10.40 to $1,439.60. December palladium fell $7.95 to $742.35. Comex December copper fell 2.45 cents to $3.2340 a pound.
Managed-money accounts slashed exposure to gold futures and options, decreasing their net-long positions to 55,456 contracts, the lowest level since Aug. 6. This was the second week in a row that net-long position declined. Managed-money accounts cut 4,580 gross longs and added 27,653 gross shorts. That means not only are speculators getting out of bullish positions, they're putting on bearish positions.
Producers and swap dealers remain net-short, but they also sharply reduced those positions by cutting a significant number of gross shorts and adding gross longs.
Non-commercials in the legacy report repeated this action. They also sharply decreased their net-long position, having hacked 4,265 gross longs and added 27,290 gross shorts. They are now net-long 84,703 contracts, which is their smallest position since Oct. 15 and the second week of a drop in the net-long position.
Commercials are net-short, but sharply reduced gross shorts and added gross longs.
TD Securities said the sharp drop in speculators' gold net-long position came after the stronger-than-expected October U.S. non-farm payrolls data. The CFTC data shows a change in sentiment by this group toward gold, they added.
Joni Teves, analyst at UBS, said the report saw the sharpest increase in gold shorts in the legacy report in about 15 years. She added that the rally in gold prices to $1,290 after the reporting window for this CFTC report closed was likely because of short covering.
The recent activity in gold suggests mixed views on the market's outlook, she added.
"All in all, the behavior of gold market participants so far in the fourth quarter highlights the divergence of opinions on market direction. There are hardly any strong views out there at the moment. Instead, there is a lot of nervous, defensive trading as investors strive to either protect year-to-date profits or avoid losses as we head closer into year-end," Teves said.
Silver net-long positions for the managed-money accounts fell, dropping to 9,782 contracts, a nearly 50 per cent fall in their net-long positions versus the previous week. This is the smallest position they've had since Aug. 6. The fall came from cutting 462 gross longs and adding 8,126 gross shorts.
Producers are net-short, but trimmed that position by adding more gross longs than gross shorts. Swap dealers are net-long, and boosted that position by adding a few gross longs and cutting gross shorts.
In the legacy report, the silver net-long for non-commercials also decreased to its smallest position since Aug. 13. They added 1,343 gross longs and 8,120 gross shorts, meaning that the new short positions more than offset new long positions. They are now net-long 17,298 contracts, also a sizeable fall from the week prior.
Commercials are net-short, but decreased that position by adding more gross longs than gross shorts.
TDS said the same forces which pushed speculators to bail on gold also affected silver. "Silver could not escape the same trend, and the specs finally reacted by adding heftily to the short side," they said, adding that silver short positions are rising, but remain 34 per cent below the June highs.
Speculative activity in the platinum group metals was mixed between the two reports.
Managed-money accounts in platinum are net-long 29,043 contracts, having cut 943 gross longs and 212 gross shorts, reducing exposure slightly on both sides. Non-commercials in the legacy report, however, slightly increased their net-long position, which now is at 37,479 contracts. In this report they added 508 gross longs and 161 gross shorts.
As in platinum, the managed-money accounts trimmed their net-long position in palladium in the disaggregated report to 26,244 contracts. They added 129 gross longs and 317 gross shorts to decrease the net-long position. In the legacy report, non-commercials added 636 gross longs and 237 gross shorts, raising their net-long to 28,479 contracts.
Analysts continue to be concerned with the high positioning in palladium. Deutsche Bank said the aggregate open interest in palladium is "at extreme levels" as remains above the 95th percentile.
Standard Bank said price action and open interest suggest that platinum and palladium have seen some long liquidation since the report came out, but they also said based on the CFTC data "being long in especially palladium is a crowded trade."
However, Standard Bank added they wouldn't put on any short position now. "Although the trade seems crowded, adding shorts ahead of the possible launch of a South African palladium ETF (exchange-traded fund) would not be prudent," they said.
Speculators turned net short in both CFTC reports for the first time since Aug. 6 when they flipped to net short in the disaggregated report. Managed-money accounts' net-short position now stands at 8,117 contracts, after being net long 4,954 in the previous report. They trimmed only 370 gross longs, but added 12,701 gross shorts to change their orientation. In the legacy report, funds nearly doubled their net-short position, having added 12,487 gross shorts and only 3,255 gross longs. They are net– short 19,018 contracts.
"Copper (speculators) moved decisively toward the shorts amid concerns the Fed (Federal Reserve) will start to taper sooner rather and later and worries that China policy may turn away from the current export and fixed investment growth model," TDS said.
For further information, see the CFTC's website: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm