Market Analysis: Hedge Funds Shift Focus as Gold Short Positions Rise

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Recent data from the Commodity Futures Trading Commission (CFTC) reveals a notable shift in hedge fund strategies concerning gold. Driven by a hawkish outlook from the latest Federal Reserve monetary policy decision and reinforced by statements from US Federal Reserve Chairman Jerome Powell, hedge funds are increasingly adopting short positions on gold while scaling back their bullish forecasts. Kriptokoin.com delves into market analyst insights and future price predictions.

“Gold’s Net Position Experiences Rapid Decline Over Three Years”

The CFTC’s Commitments of Traders report, covering the week ending on February 1, indicates a significant reduction in speculative gross long positions in Comex gold futures by money managers. These positions decreased by 32,331 contracts, bringing the total to 108,309. Conversely, short positions saw a rise of 19,130 contracts, totaling 58,395. Consequently, the net position in gold has plummeted to 49,914 contracts, marking a substantial 51% drop during the survey period. Despite gold stabilizing around $1,800, the surge in bearish speculative positions briefly pulled prices down to a one-month low of $1,780.60. Matt Simpson, a market analyst at City Index, observes that gold’s net position has swiftly declined to its lowest level since September, a trend not seen in approximately three years.

Money managers’ increasing bearish stance towards gold comes in the wake of the Federal Reserve’s groundwork for a rate hike slated for March. Additionally, the US central bank has signaled intentions to reduce its balance sheet before the year concludes. According to Kitco analysts, “Since the FOMC meeting, markets have factored in the possibility of five rate hikes this year, with a potential 50 basis point hike in March. Positive economic indicators post the January monetary policy meeting, including robust January employment figures, have further solidified these expectations.”

Daniel Briesemann: Gold’s Performance Likely to Decline Until March

Commerzbank’s precious metals analyst, Daniel Briesemann, suggests that gold prices may encounter challenges in the short term leading up to the next Federal Reserve monetary policy meeting in March. He elaborates, “It remains uncertain how long gold can withstand the current market environment characterized by increasing expectations for interest rate hikes. It’s also evident that gold struggles to make significant gains under these conditions. We anticipate that gold’s performance will diminish until the Fed’s initial rate hike, which we predict will occur in March.”

In parallel with gold, the silver market has also witnessed a sharp drop in speculative interest on the upside. The report indicates that speculative gross long positions held by money managers in Comex silver futures fell by 5,521 contracts, totaling 46,101. Meanwhile, short positions decreased by 9,939 contracts to 34,142. The net position in silver now stands at 11,959 contracts, reflecting a drop of more than 56% from the previous week. Despite an increase in bearish positions pushing silver prices from $24 to $22 during the survey period, analysts maintain a positive outlook on silver, citing strong industrial demand as a supporting factor.