Hedge funds are increasingly valuing gold and silver, as recent data from the Commodity Futures Trading Commission (CFTC) shows a rise in bullish bets among money managers. The latest Commitments of Traders report for the week ending August 20 reveals that while speculative gross long positions in Comex gold futures were reduced by 18,298 contracts to 222,142, short positions increased by 2,908 contracts to 28,837. This adjustment brings gold’s net long positions to 193,305 contracts, marking the highest level of bullish speculative interest since early March 2020, when the Federal Reserve cut interest rates during the initial stages of the COVID-19 pandemic.
Despite gold prices reaching record highs and silver trading at a six-week peak, analysts suggest the precious metals market remains relatively balanced, with minimal speculative excess. December gold futures recently traded at $2,350 per ounce, showing a slight increase of 0.15% for the day.
Though speculative positioning is at a four-year high, the increase has been gradual, with relatively stable speculative activity since March. Joy Yang, Global Head of Index Product Management at MarketVector Indexes, noted that gold has been building a robust foundation as it continues to set new highs.
Nicky Shiels, Head of Research & Metals Strategy at MKS PAMP, observed that recent inflows are about a quarter of those seen prior to the 2019 rate-cutting cycle. Nevertheless, she highlighted that current positioning levels are already above those of the previous cycle. Shiels indicated that despite high speculative positioning, gold still has potential for further gains.
Shiels also noted that the “Powell Pivot” and any resulting US dollar weakness could accelerate inflows into gold as the Federal Reserve’s easing cycle begins. TD Securities analysts pointed out that the current flows reflect discretionary money managers driven by factors like the anticipated cutting cycle, geopolitical tensions, deficits, lower rates, and a weakening dollar.
Attention is also shifting towards silver, which has held above $29 per ounce. The CFTC report shows that money-managed gross long positions in Comex silver futures increased by 3,712 contracts to 39,517, while short positions decreased by 2,793 contracts to 9,678. Silver’s net length stands at 29,839 contracts, reaching a one-month high. During the survey period, silver prices rebounded above $30 an ounce, outperforming gold as the gold/silver ratio decreased to around 84 points, down from 90 at the start of the month.
Both gold and silver are benefiting from a weaker US dollar, which has fallen more than 4% since the beginning of the month, enhancing their attractiveness as investment assets.
