Saturday, March 22, 2014

Managed Money Traders Reduce COMEX Gold Shorts Ahead of Fed Statement

HOUSTON -- (GotGoldReport) -- Although the price of gold dropped as much as about $60 or so shortly afterwards, as of Tuesday, March 18, traders on the COMEX the CFTC calls Managed Money had pared their gross short bets for the yellow metal down to just  16,153 lots, the lowest since November 2012 with gold then in the $1740s. 

So, on Tuesday, with gold in the $1370s and before the new Chair of the Fed had uttered anything meaningful,  The Funds (hedge funds, CTA’s, etc.) were still of a mind to increase their long gold bets while reducing their shorts, as the graph below clearly shows. 

20140323 Gold shorts

(Chart showing gross short futures positions by traders the CFTC classes as Managed Money.  Source:  CFTC for COT data, Cash Market for gold, GGR.)

For the COT reporting week Managed Money traders actually increased their NET long bets for gold by 15,032 lots.  They were joined on the long side by all the other non-commercial traders as shown in our usual weekly recap.    

20140323 Gold Net

(Chart showing NET futures positions by traders the CFTC classes as Managed Money.  Source:  CFTC for COT data, Cash Market for gold, GGR.)

See the data recap at this link

Chart below tracks the Managed Money gross short positions over time. 

20140323 Gold Daily

 

 

Note:  The Managed Money high for gross short futures contracts occurred December 3, 2013 at a record 83,730 contracts with gold then in the $1220s. So as gold sold off to mark the right side of the double bottom formation some of the selling pressure is directly attributable to Funds selling on momentum.  The selling pressure would prove ultimately to be unsustainable this time, however. 

Since that time (from Jan to now) as gold has recovered as much as $135 or 11% the Funds have very strongly reduced their gross shorts (as one might expect them to).  To quantify that statement, on December 31 2013 Managed Money held a near record 78,334 gross short futures contracts with gold then $1223.  By March 18, 62,181 or 79% of those downside bets would be gone as gold recovered to as high as $1390.    

Interestingly, as shown in the graph above, the pace of Managed Money trader short reduction did seem to pick up as gold re-crossed the $1320 price zone from below (which occurred in mid-February and early March). Coincidental or not, the acceleration in short reduction also increased as the price regained chart real estate above the popular 200-day moving average. 

(Click on the chart itself for a slightly better resolution pop up.)      


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Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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