Hedge Funds Liquidate Gold Bets Amid Hawkish Fed
Hedge funds are continuing to liquidate their bullish gold bets and increase their short positioning as the Federal Reserve maintains its hawkish bias and aggressive interest rate levels. The CFTC’s Commitments of Traders report revealed that money managers increased their speculative gross long positions in Comex gold futures while short positions also rose. Concerns about gold potentially dropping to lower levels and the recent spike in petroleum complex prices prompted short exposure and long liquidation. The gold market is now net long by 9,109 contracts, its lowest since mid-March.
Meanwhile, commodity analysts noted that gold has experienced bearish outflows for three consecutive weeks, with $3.9 billion leaving the market. Gold’s speculative bullish positioning for this month has seen a significant decline, but prices have traded in a narrow range between $1,920 and $1,930 per ounce. Despite the decline in speculative interest, some analysts believe that gold’s ability to hold critical support levels may create conditions for a potential short squeeze. Christopher Vecchio, head of futures and forex at Tastylive.com, suggests that the worst days for gold and silver may be over, expecting both metals to trend around $1,900 for a while.
The Silver Market Sees Short-Squeeze Benefits
The silver market is already experiencing the benefits of a short squeeze, with speculative interest pushing back into neutral territory after two consecutive weeks of being net short. Money-managed speculative gross long positions in Comex silver futures have risen while short positions have fallen, resulting in the market being net long by 1,383 contracts. The renewed bullish positioning has pushed gold prices back above $23 per ounce and silver prices to a three-week high above $24.
Analysts attribute silver’s rally to the growing industrial demand driven by the global green energy transition, particularly in the solar power sector. However, silver still faces headwinds as the Federal Reserve maintains aggressive monetary policies and rising bond yields in anticipation of a potential rate hike in November. These factors provide support for the U.S. dollar, which may weigh on silver prices.
