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Home » News » Hedge Funds are Selling Their Gold, But They are Not Bearish

Gold prices face volatility amid uncertainty over U.S. interest rates, with hedge funds trimming bullish positions. According to the latest Commodity Futures Trading Commission data, traders are hesitant to take significant bearish bets. Despite gold holding above $2,000 an ounce, analysts foresee potential downward pressure.

In an exclusive interview with Kitco News, Craig Erlam, senior market analyst at OANDA, describes the precious metal’s price action as a “tossup,” lacking a catalyst for an upward trend. CFTC’s Commitments of Traders report reveals a decrease in money managers’ gross long positions in Comex gold futures, while short positions see a marginal increase.

The net length of gold contracts has reached a two-month low at 88,459, indicative of recent selling pressure. Analysts propose consolidation amid uncertainty about the Federal Reserve’s monetary policy. The lack of clarity in economic data adds to market volatility, with a 70% chance of a rate cut in March, creating a division among central bankers. For those looking to navigate this market situation, considering the option to “sell gold” may be a strategic move.

TD Securities’ commodity analysts note the market’s reaction to labor market strength, inflation pressures, and ambiguous policy rate reductions. Despite a recent $4.1 billion outflow from the gold market, selling pressure does not push it into oversold territory.

Geopolitical turmoil, including U.S. and U.K. military actions in Yemen, contributes to renewed safe-haven demand, supporting gold prices above $2,000. Investors remain hesitant to take significant short positions.

In the silver market, increased bearish bets coincide with liquidation of long positions. Comex silver futures see a decrease in gross long positions, pushing net length to 8,348 contracts, a two-month low. Silver’s struggle mirrors gold’s, driven by Federal Reserve policy uncertainty and global economic concerns.

Silver prices trade in a narrow range between $23.00 and $23.50 an ounce, with analysts highlighting potential weakening industrial demand in a global recession. However, the green energy transition and growing solar energy demand provide a solid foundation for silver, mitigating downside risks even in a challenging economy.

Conclusion

In conclusion, while gold and silver markets navigate through a period of uncertainty and volatility, there are notable factors contributing to optimism. Geopolitical tensions and renewed safe-haven demand are helping to sustain gold prices above $2,000, with investors showing hesitancy to take significant short positions. 

Additionally, the green energy transition and growing solar energy demand offer a solid foundation for silver, mitigating downside risks even in the face of potential weakening industrial demand. 

As traders strategize amid the complexity, the diverse factors at play suggest a nuanced and dynamic landscape, leaving room for positive developments and potential opportunities in the precious metals market.

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Gruyere increases production in pursuit of gold

Gold Prices Surge to Record High, Cross $2,720 Amid Global Uncertainty

Gold prices saw a significant rise, reaching around $2,720 in the early hours of Monday's Asian trading session.  This surge in demand for gold, a well-known safe-haven asset, is driven by heightened global uncertainties, including concerns about the US election and escalating geopolitical tensions.  Ongoing conflicts in the Middle East and potential economic challenges in China have also contributed to the rise in gold prices. Investors are turning to gold as a reliable option amidst these crises.  Alexander Zumpfe, a metals trader at Heraeus Metals Germany, commented, “With the war between Israel and Hezbollah intensifying, investors are seeking refuge in gold. Additionally, uncertainty over the US presidential election and possible monetary easing from the Federal Reserve are pushing gold prices higher.”  Expectations of further interest rate cuts by the US Federal Reserve are also supporting the precious metal’s value. The Fed recently lowered interest rates for the first time in over four years, and there is growing anticipation for additional cuts. According to the CME FedWatch Tool, there is a 90% chance of another rate reduction in November. Lower rates often increase the appeal of non-yielding assets like gold.  However, economic concerns in China could limit gold’s upward momentum. China, the world's largest consumer of gold, experienced slower-than-expected growth in its economy during the third quarter of the year. The National Bureau of Statistics reported a GDP growth of 4.6% for Q3, slightly below their target of 5%. This slowdown could impact global demand for gold.  Despite these challenges, gold continues to attract attention as a safe investment option in these uncertain times. 

Gruyere increases production in pursuit of gold

Gold Prices Steady as U.S. PPI is Moderate in September

The gold market remained stable as new data indicated that U.S. producer prices experienced moderate pressure in September.  According to the U.S. Labor Department’s report on Friday, the Producer Price Index (PPI) rose by 0.1% last month, following a 0.2% increase in August. This slight increase matched economists' predictions, who also expected a 0.1% rise.  Over the past 12 months, overall wholesale inflation rose by 1.8%, exceeding the expected 1.6%, but slightly lower than August’s revised figure of 1.9%. Meanwhile, core PPI, which excludes volatile food and energy prices, increased by 0.2% in September. This was in line with expectations and followed a 0.3% rise in August. The annual core PPI rose to 2.8%, above forecasts of 2.7% and August’s 2.4% figure.  After the 8:30 AM EDT data release, gold prices briefly spiked to session highs. Spot gold reached $2,650.19 per ounce but quickly returned to $2,646.60, marking a 0.63% gain for the day.  PPI is considered a key indicator of inflation since rising costs for producers are often passed on to consumers. Analysts suggest that if producer prices continue to ease, along with improving Consumer Price Index (CPI) inflation, the Federal Reserve could feel confident in reducing interest rates in upcoming meetings. This would likely support gold's long-term upward trend. 

Gruyere increases production in pursuit of gold

Gold Market Sees Consolidation Amid Shifting Economic Conditions

The gold market has entered a phase of consolidation, showing a slight decline after a strong rally in recent months. Since late July, gold futures surged nearly $300, rising from just below $2,400 per ounce to reach record highs. The lack of any significant correction during this rally highlighted the positive sentiment in the market.  Gold’s rapid rise to record levels was driven by signs that inflation was cooling and moving closer to the Federal Reserve’s 2% target. As inflation eased, investors grew optimistic about the possibility of the Fed lowering interest rates sooner rather than later. This optimism pushed gold prices up by $300 from March to September.  Even though the Federal Reserve was slow to cut rates initially, the bullish mood surrounding gold remained strong, allowing prices to continue climbing. The Fed eventually reduced rates by 50 basis points on September 18, which triggered another surge in gold prices. By September 26, gold hit an all-time high, with December contracts reaching $2,708.  However, last week saw gold prices begin to ease as the U.S. dollar strengthened and treasury yields rose, putting pressure on the market. Over the past week, gold prices fell five out of seven trading days, but these declines have not yet reached the point of a significant correction. The most notable drop came on September 30, marking the largest decrease since gold hit its record high.  As of 6 PM EDT, December gold futures were down by $11.30, settling at $2,661.90. This consolidation phase comes as market expectations for the Fed’s next moves begin to shift. Recent comments from Fed Chairman Jerome Powell have dampened hopes for another major rate cut in November. The CME FedWatch tool now shows an 84% chance of a smaller, 25-basis point cut, while a 16% chance remains for no cut at all.  This shift in market sentiment is largely due to a stronger-than-expected jobs report. The U.S. economy added 254,000 jobs, far surpassing the 140,000 forecasted, and the unemployment rate fell to 4.1%, adding complexity to the economic outlook.  While gold’s recent rally has not seen any major corrections, many experts believe the market is due for one soon. However, the situation could change depending on geopolitical events, such as a potential retaliation by Israel against Iran following last Tuesday’s attack. U.S. President Joe Biden has stated that Israel has the right to respond, though he urged a proportional response. Such developments could impact global markets, including gold.