(Kitco News) - The gold market ended 2015 on a softer note as hedge funds and money managers reestablished their short bets, pushing the market close to its previous record net-short position.
For the week ending Dec. 29, the disaggregated Commitment of Traders Report (COTR) showed money-managed speculative gross long positions of Comex gold futures fell by 3,901 contracts to 76,071. At the same time, gross shorts rose by 3,231 contracts to 103,272. The latest data showed the gold market is net short by 27,201contracts; the record short positioning among money managers was established earlier in the month at 27,219.
Despite the renewed selling pressure, Comex February gold futures were relatively unchanged -caught in a narrow range, falling 0.37% -- during the shortened survey period, due to the New Year holiday.
John Weyer, director of commercial hedging at Walsh Trading, said it is not surprising that hedge funds ended the year squeezing the last profits out of their favorite gold trade.
“Right now, there is a bearish tilt in the gold market and for year-end, the money managers came back to the party they have liked for a long time,” he said.
However, some analysts see some bullish potential for gold as speculative shorts remain near record highs. They noted that the rally at the start of the year, which pushed prices to a three-week high, is a sign of short covering in a crowded marketplace.
“Short positioning in gold remains elevated, raising the risk of a short-squeeze should the risk-off tone persist and attract more safe-haven gold buying,” said Joni Teves, strategist at UBS, in a research report published Monday.
Phillip Streible, commodity strategist at RJOFutures, said he remains constructive. He explained that because of the high level of speculative short positioning, it might not take much more global weakness to spook sensitive short-sellers.
“China is having another massive meltdown and I think another sharp fall in equities will eventually drive investors back to gold,” he said. “In the coming weeks, I think we are going to see a sharp reduction in short positioning.”
The silver market also saw significant selling pressure as hedge funds established new short positions, according to the CFTC data.
The disaggregated COTR showed money-managed speculative gross long positions of Comex silver futures fell by 979 contracts to 49,244. At the same time, short contracts rose by 2,498 contracts to 42,105. The silver market’s net length now stands at 7,139 contracts.
During the survey period, Comex March silver futures fell more than 2%, pushing back below $14 an ounce.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
