Strategists at HSBC remain neutral on Gold and Silver as they see muted momentum.
Higher rates and real bond yields create a competitive disadvantage for Gold
“Despite the recent bounce in commodity prices, we do not expect Gold and Silver to outperform in the coming months.”
“USD’s recent strength has weighed on metals, while higher rates and real bond yields create a competitive disadvantage for Gold compared to cash and bonds.”
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Kitco News – Fund managers sharply increased their bullish positioning in gold futures during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.
Markets seemingly were factoring in a more dovish U.S. Federal Reserve even before policymakers gave markets a dovish surprise for the second straight meeting, analysts said.
During the week-long period to March 19 covered by the report, Comex April gold rose by $8.40 to $1,306.50 an ounce, while May silver dipped 4.1 cents to $15.372.
Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.
The CFTC’s most recent “disaggregated” report showed that money managers increased their net-long position in gold to 30,475 futures contracts as of March 19 from 17,407 the week before.
The cut-off date for the data was one day ahead of the last meeting of the U.S. Federal Open Market Committee, in which policymakers collectively signaled that there may be no rate hikes in all of 2019.
“Money managers aggressively covered their short gold positions and took out new long exposure as they anticipated the FOMC to sound a dovish tone,” said TD Securities. “The significant increase in length was also driven by the concurrent weakening of the USD [U.S. dollar] and renewed economic growth concerns.
“Indeed, the Fed delivered a significantly more dovish message than the market expected as it eliminated a hike this year. This prompted a relief rally, but no surge into a sustained breakout.”
The disaggregated data showed that money managers cut their gross shorts by 12,452 lots. The number of new longs increased by a modest 616.
“Speculative financial investors are … likely to continue betting on rising gold prices after having already stepped up their net-long positions considerably to [nearly] 30,500 contracts in the week to 19 March, according to the CFTC’s statistics,” said Commerzbank. “In our opinion, this further paves the way for gold as it continues on its upswing.”
Meanwhile, in the case of silver, the funds’ net length increased slightly to 9,716 lots from 9,487 as the amount of fresh buying slightly outpaced the fresh selling. Gross longs rose by 814 lots, while total shorts increased by 585.By Allen Sykora
The following chart includes the year to date totals for 2019 Gold and Silver American Eagle Sales from the U.S. Mint as of 5pm on March 28th. The chart also shows the difference in sales from our last report on March 22nd.
