Markets

Funds Increase Net Length For Fourth Straight Week As Gold Keeps Rising

(Kitco News) - Fund managers added to their net long position in gold for the fourth straight week, according to the most recent data put out by the Commodity Futures Trading Commission, and their net length is now at the highest level of the year.

Still, the funds' combined length remains below the peak from earlier last fall, and one futures veteran says it has not yet risen enough to leave him worried about the market being overbought.

As a general rule, the net length for other precious metals fell slightly but increased for copper.

For the week ending March 1, managed-money accounts were net long in Comex gold by 201,084 contracts for futures and options combined, according to the CFTC's "disaggregated" reporting system that began in September 2009. This is up from 182,739 the prior week, is highest level since Nov. 2 and is up 61% from a cycle low on Feb. 1.

The most recent increase was mainly the result of fresh buying, as the number of total longs rose by 16,058 lots. There also was some short covering, in which traders buy to exit positions in which they previously sold, as reflected by a decline of 2,288 total shorts.

Under the longtime "legacy" reports, the large non-commercials - historically also thought of as the funds - were net long by 230,325 contracts for futures and options combined, up from 213,250 the previous week and the largest level since Dec. 28.

"The funds remain long, but the link is not too disproportional," said Sterling Smith, market analyst and commodity trading advisor with Country Hedging. "I don't see anything that would overly stress the market here…I don't see any excessive net length here."

Managed-fund accounts were net long by as much as 232,220 lots back in late September, while the non-commercials were net long by as much as 283,462 in early October.

During the reporting week covered by the most recent CFTC data, April gold rose $17.20 to a settlement of $1,431.20 on March 1. Analysts with Barclays said the strength in gold lately has come from speculative interest as the net length among tactical investors continued to rise. During that same time frame, holdings of the world's largest gold exchange-traded fund, SPDR Gold Trust, dipped from 1,218.24 metric tons as of Feb. 23 to 1,210.96 as of March 1.

In the most recent data, managed-money accounts trimmed their net long position in Comex silver slightly to 35,182 lots for futures and options combined. This was down only slightly from 35,438 lots the prior week and was the first time net length had not risen since Jan. 25. For the non-commercial accounts, the net length slipped to 42,047 from 43,476.

Comex May silver rose $1.123 for the week to a close of $34.427 an ounce on March 1.

Fund net length also dipped slightly in palladium. Fund managers scaled back their net long to 13,178 in the disaggregated report, compare to 13,410 the prior week. In the legacy report, the non-commercials scaled back their net long to 15,410 from 15,751.

Figures were mixed in platinum. In the disaggregated report, fund managers increased their net long to 25,754 from 25,039 the prior week. But in the legacy report, non-commercials trimmed their net long slightly to 28,878 from 29,091 the prior week.

Elsewhere, the fund net long in copper rose, with Barclays pointing out that traders exited from more short positions than they exited from longs. Money managers cut their total longs in copper by 2,026 lots, the disaggregated report shows. But they reduced their total shorts by an even larger 3,540. The end result is the net length rose to 25,707 lots from 24,193 the previous week.

There was a similar pattern in the legacy report, as the net length rose to 26,619 from 23,230 the previous week.

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By Allen Sykora of Kitco News; asykora@kitco.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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