(Kitco News) - Gold continues to benefit from renewed buying interest and short covering from hedge funds and money managers, but analysts are mixed as to how long this trend can last.
According to the disaggregated Commitment of Trader Report for the week ending Feb. 9, money managers increased their speculative gross long position in Comex gold futures by 20,493 contracts to 121,059. At the same time, short bets fell by 11,107 contracts to 60,423. The latest data shows the gold market is net long by 60,636 contracts.
April Comex gold futures rose every single day of the survey period, briefly breaking through $1,200 an ounce for the first time since October, for an impressive gain of more than 6%. However, the latest CFTC report does not include trade data from Thursday’s parabolic rally that saw prices hit a one-year high of $1,263.90 an ounce.
U.S. markets were closed Monday for Presidents Day; however, as of 12:27 a.m. EST, in light electronic trading, April gold was at $1,209.30 an ounce, down $33.10 on the day.
Analysts at Commerzbank said in a note Monday that the market looks overextended as net longs have hit a three-month high, a sharp reversal of the net short position seen at the start of the year.
The analysts added that the sharp rise in gold and silver is “putting the price rise on shaky ground.”
However, other analysts are confident that gold and silver’s rally can continue as hedge funds and money managers see the precious metal as a safe haven in an environment of growing global recession fears, negative bond yields and a weaker U.S. dollar.
In an interview with Kitco News Friday, Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, said that hedge funds have been under-invested in gold and are now having to play catch up.
“[Funds] are desperate to get in and will be buying on dips,” he said.
Commodity analysts from UBS said in a report Friday, ahead of the CFTC data, they would not be surprised to see a consolidation period, which could see gold’s net position reduced; however, they added that they suspect there would be buying on dips and limited short selling in the marketplace.
“Shorts are likely to be more reluctant to rebuild positions even at these lofty heights given lingering uncertainty across broader financial markets,” they said.
Along with gold, silver is also attracting strong investor interest, as its net length expanded last week. The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 7,927 contracts to 58,876. At the same time, short contracts fell by 6,800 contracts to 19,132. The silver market’s net length now stands at 39,753 contracts.
During the survey period, Comex March silver futures saw an incredible, almost 8% rally, as prices drove solidly above $15 an ounce. As of 12:27 am. EST, March silver futures were trading electronically at $15.35 an ounce, down 44 cents on the day.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
