(Kitco News) - Speculators reduced their net-long exposure to U.S. gold and silver futures and options in the week ended April 26, according to U.S. government data.
The Commodity Futures Trading Commission documented in its weekly commitment of traders report that speculators cut in gross long positions, which led to a subsequent drop in the net-long position for gold and silver futures and options traded on the Comex division of the New York Mercantile Exchange in both its disaggregated and legacy reports.
The report is current to April 26, the day that silver fell initially after trying to take out the $50 an ounce area the day before.
During the timeframe covered by the CFTC, prices for precious metals and copper rose across the board. On April 26, Comex June gold settled at $1,503.50 an ounce, and rose $8.50 during the time frame. July silver rose $1.152 an ounce to settle at $45.079. Nymex platinum gained $34.10 an ounce and settled at $1,805.40, while palladium gained $24.60 an ounce, settling at $755.70. Comex July copper rose 9.1 cents a pound, and settled at $4.3395.
Both gold and silver advanced after the reporting period ended as the dollar fell, but silver's trade was particularly volatile. "Triggers for the volatility appear to be a second increased margin call by the CME Group, a sharp reduction in non-commercial net length reported by the CFTC and a strengthening U.S. dollar. Increasingly this looks like a double top formation on the chart," said Morgan Stanley in a research note.
Managed-money accounts in gold cut 7,452 gross long contracts and added 576 gross shorts, reducing their net-long position to 220,548 contracts. Producers and swap dealers reduced their net-short position by adding longs and cutting shorts.
Similar action was seen in the legacy report. The non-commercial traders cut 10,169 gross long contracts and added 3,230 gross short contracts, which took their net-long position down to 238,311 contracts.
For the first time in a while, managed-money participants in silver sliced a significant number of gross longs and added gross shorts. They cut gross longs by 3,131 contracts and added 2,282 gross shorts, lowering the net-long position to 25,791 contracts, the lowest net-long position since Feb. 1. Producers cut from both sides, but eliminated more gross shorts, dropping their net-short position. Swap dealers added gross longs, cut gross shorts, reducing their net-short position.
The movement by non-commercials in silver's legacy report was even more pronounced. There funds cut 5,316 gross longs and added 5,381 gross shorts, pushing the net-long to 30,736 contracts, their smallest position since Jan. 25. Commercial traders cut from both sides, but dropped more gross shorts, lowering their net-short position.
Several analysts over the past few weeks had pointed out that there was muted big speculator activity in silver, which they had flagged as a potential warning sign. They also pointed out that the run-up in silver prices over the month was not attributable to these big speculators.
Sterling Smith, commodity trading adviser at Country Hedging, said the drop in long positions in silver represents profit-taking as the market got overheated in its attempt to visit $50. He also said the move may also be influenced by rolling of positions out of the May contract as that went into first notice day.
Smith said that the funds who got out of the silver market in this report may have returned as prices fell sharply Monday, but that won't be seen until the next CFTC report due out Friday. "We'll see how this market behaves once it gets closer to $50. If it can't take it out, we may have a brutal correction," he said.
Much of that may depend on the weakness of the dollar, which has supported precious metals, he added.
Speculators in platinum and palladium increased their gross long positions in both PGMs. In the disaggregated report, the platinum net-long rose to 21,643 contracts, while the palladium net-long rose to 10,580 contracts. This activity was repeated in the legacy report, with speculators increasing gross longs, and decreasing gross shorts. Non-commercial net-long positions for platinum stand at 25,819 contracts and at 11,412 contracts for palladium.
Copper saw very little action by managed-money accounts, which cut nearly an identical number of gross longs and shorts, leaving their net-long position a shade higher, at 17,555 contracts. In the legacy report, non-commercial traders cut more gross longs than shorts, lowering their net-long position to 23,682 contracts.
For a more detailed breakdown of the CFTC's reports, please see: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
By Debbie Carlson of Kitco News email@example.com