Hedge funds continue to contribute to bearish bets on gold. Still, analysts see the downside for gold likely to be limited. He also says that the market has become an attractive counter move.
Bearish position below at highest level since May 2019
The Commodity Futures Trading Commission (CFTC) has released its Commitments of Traders report for the week ending July 19th. The report showed money managers cut their speculative gross long positions on Comex gold futures to 91,056 with 613 contracts. At the same time, short positions increased by 11,992 contracts to 109,794.
Thus, the net short positioning of gold rose to 18,738 contracts. During the survey period, gold prices tested support at around $1,700. The bear position is at its highest since May 2019.
“The gold market is in a solid downtrend”
The Federal Reserve is scrambling to slow the economy and lessen the pressures of rising inflation. For this, it is aggressively moving towards raising interest rates. Therefore, analysts note that the gold market is in a solid downtrend.
cryptocoin.com As you follow, the US Federal Reserve plans to raise interest rates by another 75 basis points on Wednesday. Markets expect interest rates to potentially rise to between 3.50% and 3.75% by the end of the year.
“Any sign that the Fed is giving up will be good for gold”
But many analysts say these rate hikes are priced in the market. That’s why they say it’s limiting the fall of gold for the rest of the year. Some analysts also note that a slowing economy and a possible recession may cause the Fed to slow down the rate of increase. Sprott Hathaway Senior Portfolio Manager, Special Circumstances Strategy John Hathaway,
Any sign that the Fed is giving up on rate hikes will be good for gold. I look at these numbers as a signal that emotions and people are hopeless, discouraged. You get these dramatic rallies from these low points in terms of psychology.
“The market is extremely vulnerable to shorts”
Commodities analysts at Société Générale say the gold market has seen a $21 billion bear position since June 21. They also note that the market is extremely vulnerable to shorts.
Analysts say that the last time the net position of gold was so low, the market turned rapidly. Next, they say, prices went into a months-long rally that caused them to hit record highs above $2,000.
“Yellow metal is definitely not at its peak!”
John Hathaway, Senior Portfolio Manager at Sprott Hathaway Special Circumstances Strategy, additionally states:
Emotion does not guarantee anything. But with this kind of historical comparison, gold is definitely not at its peak. Even for an agnostic trader, you want to be careful with this kind of thing.
