(Kitco News) - The sharp break in precious metals prices caused speculators to accelerate their exit of precious and base metals long positions, according to U.S. government data released Friday.
The drop isn't unexpected since the previous report did not include the sell-off in financial markets, which started on Sept. 21. Speculators had started to reduce their net-long positions in the prior report, so the data in the current report reflects continued closing out of longs. Net-long positions for funds fell across the board in both the legacy and disaggregated weekly commitment of traders reports released by the U.S. Commodity Futures Trading Commission for the week ended Sept. 27.
December gold futures on the Comex division of the Nymex dropped $156.60 an ounce during the timeframe, settling at $1,652.50 on Sept. 27. December Comex silver futures slid $8.601 an ounce, settling at $31.536. Nymex October platinum slipped $207.90 an ounce to $1,574 and Nymex December palladium fell $67.80 an ounce to $649.95. Comex December copper settled at $3.4395 a pound, down 28.6 cents.
The losses as tallied over the timeframe are steep. "Daily price swings in the metals have been large as uncertainty and skittishness is translated into prices," said Barclays Capital.
Managed-money accounts significantly decreased their net-long position in gold, cutting 24,596 gross longs and adding 6,224 gross shorts, dropping the net long position to 129,502 contracts. Producers cut exposure to both sides, but cut many more gross shorts than longs, lowering their net short position. Swap dealers decreased their net-short position by adding gross longs and slicing gross shorts.
This is the lowest net-long position for managed-money accounts since February 2010 and the second-lowest tally since this report's inception in September 2009.
Non-commercials in the gold legacy report trimmed 34,710 gross longs and added 9,569 gross shorts, reducing the net-long position to 158,754 contracts. Commercials cut from both sides, particularly from the short side, which lowered their net-short position.
Speculators are now sitting on their smallest net-long position since May 2009.
Barclays said the non-commercial position as a percentage of open interest is at 27%, which is the lowest since 2008 when the positioning fell to 21%.
In the silver disaggregated report, speculators exited positions on both sides of the market. They cut gross longs by 8,184 contracts and gross shorts by 249 contracts, reducing their net-long to 14,866 contracts. Producers and swap traders lowered their net-short by adding gross long and cutting gross shorts.
This is the lowest net-long position for speculators since the disaggregated report began.
In the legacy report, non-commercial traders added a small number of gross shorts and cut gross longs, slicing the net-long position to 19,894 contracts. Commercials lowered their net-short by clipping gross shorts and adding gross longs.
Barclays noted this is their lowest position since April 2009 and the third week in a row that silver speculators cut their net long position.
Silver is suffering from exposure from its industrial component, said TD Securities.
In the platinum group metals, funds cut gross longs and increased gross shorts in both platinum and palladium, slicing the net-long position for both metals. In platinum, managed-money accounts lowered their net-long to 14,057 contracts, the lowest since July 2010. In palladium, managed-money accounts reduced their net-long to 7,016 contracts, the lowest since the report began.
In the legacy report, the non-commercial platinum traders dropped longs and added shorts, lowering the net-long position to 20,785 contracts, the lowest since early August. Similar action was seen in palladium as the non-commercial traders' net-long position fell to 6,978 contracts, the lowest since May 2010. Commercial traders in the legacy report for PGMs reduced their net short position.
Funds reduced their net short position in copper, cutting gross longs and gross shorts, lowering their net-short position to 3,528 contracts in the disaggregated report. The non-commercial traders eliminated positions on both sides, but cut more shorts than longs, which dropped the net-short position to 1,423 contracts in the legacy report. Commercial traders cut gross longs and added slightly to gross shorts, lowering their net long status.
For a more detailed breakdown, please visit the CFTC website: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
By Debbie Carlson of Kitco News firstname.lastname@example.org;