2011-05-10

Gold - Net speculative length fell marginally

According to the latest CFTC (Commodity Futures Trading Commission) data, released on Friday 6 May 2011 (note that this data covers the week ending 3 May 2011 and does not include the sharp drop in commodities markets experienced at the end of last week):

  1. Last week saw April’s gains all but erased as open interest fell by 47 tonnes. As of last Friday, gold open interest stood at 1,662 tonnes on COMEX, just shy of the 1,660 tonnes at the beginning of April. The fall in open interest was accompanied by a significant 4.4% w/w fall in prices.
  2. Net speculative length fell marginally, after the previous week’s dramatic drop of 43.1 tonnes. Falling 5.8 tonnes over the past week, the net speculative position for gold now stands at 760.4 tonnes — down from this year’s high of 809.2 tonnes recorded only two weeks ago. The fall was largely due to a modest drop of 9.3 tonnes in speculative longs. The
    fall in speculative shorts of 3.5 tonnes helped to lessen the overall decline in net speculative length. Given that the changes in speculative positions were minimal, we would not take this as an overly bearish signal for gold, at least not over the medium term. Rather, we see participants adjusting positions which might lead to some short-term downward pressure at the worst. Encouragingly, ETF holdings of gold saw a modest increase of 5.1 tonnes over the week.
  3. We do note that speculative shorts, currently at 133.8 tonnes, are still relatively high compared to last year’s average of 90.7 tonnes, indicative of a market not as confident in gold’s prospects as in 2010. This is most likely attributable to concerns over an end to US monetary accommodation.
  4. Net speculative length as a percentage of open interest is still largely in line with the 31% average seen during 2010, and an encouraging sign that the speculative market is still far from overextended.

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