(Kitco News) - After taking a bit of a break, hedge funds and money managers are starting to wade deeper into gold waters, according to the latest data from the U.S. Commodity Futures Trading Commission.
. During the week through January 26, which is the period covered in the latest CFTC report, Comex February gold futures rose by nearly more than 3%, pushing back above $1,100 an ounce on the back of short covering and some modest new buying. Currently, April gold futures last traded at $1,126.20 an ounce, up $9.8 on the day.
According to the disaggregated Commitment of Trader Report (COTR), money managers increased their speculative gross long position of Comex gold futures by 11,691 contracts to 95,745. At the same time, short bets fell by 4,673 to 78,942 contracts. The latest data shows the gold market is net long by 16,803 contracts, well up from the last week’s next length of only 403 contracts.
According to some analysts, gold’s net length is at its highest level in almost three months. Analysts at Commerzbank said there has been a dramatic shift in the marketplace as the net short position was near record lows just four weeks ago.
Ole Hansen, head of commodity strategy at Saxo Bank said that there is renewed investment interest in gold as it has been one of the top performing assets so far this year. Since the start of the month to the end of the latest survey period, gold prices have rallied 5.5%.
Bart Melek, head of commodity research at TD Securities, noted that global economic weakness is causing investors to reevaluate their expectations for interest rate hikes in 2016.
“Specs aggressively covered their short gold exposure and built new long positions as markets increasingly decided that recent economic underperformance will prompt the Fed to tilt policy toward a more dovish stance,” he said in a research note Friday. “Indeed, investors called it correctly.”
Melek added that he could see further expansion of gold’s net length as the latest survey data does not incorporate the latest Federal Reserve statement, which was deemed dovish by the market, and boosted the gold price to nearly a three-month high.
George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures, agreed that gold still has more potential to move higher. In a note to clients, he said that despite increased investor interest, hedge funds continue to be under owned in the gold market.
The silver market also saw its net length expand; however, unlike gold, most of the gains were made as a result of short covering. The disaggregated COTR showed money-managed speculative gross long positions of Comex silver futures rose by 1,415 contracts to 50,614. At the same time, short contracts fell by only 7,532 contracts to 25,218. The silver market’s net length now stands at 25,396 contracts.
Commerzbank’s analysts also noted that silver net longs nearly hit a three-month high.
During the survey period, Comex March silver futures gained 3.8% with prices reaching their highest level since Dec. 7. Silver prices have rallied 5.4% so far this year. Silver futures last traded at $14.32, up 7.7 cents on the day.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
