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Sentiment in the gold market took a turn for the worse as hedge funds increased their bearish bets, bringing speculative stance closer to neutral.
However, some analysts are optimistic that growing bearish sentiment suggests that prices could be close to the bottom.
In the CFTC disaggregated Commitments of Traders report, money managers reduced their speculative long positions in Comex gold futures by 7,378 contracts to 103,472. At the same time, short positions rose by 11,690 contracts to 86,438.
The net length of gold currently stands at 17,034 contracts, which is 52% less than the previous week. Gold's net length is at a three-year low.
Economists noted that as the Federal Reserve looks to raise interest rates by another 75 basis points later this month, gold is taking a turn for the negative.
The aggressive stance of the central bank in monetary policy contributed to the growth of the US dollar. This pushes break-even levels—the difference between nominal and real returns is lower. In particular, the US dollar is trading at a 20-year high, which has been an extraordinary headwind for gold.
While some analysts say that gold continues to hold up relatively well in the current environment, other analysts do not rule out a further decline.There are new bearish sentiments on the market, not only in gold. Hedge funds are also increasing their silver short positions.
The disaggregated report showed that money-driven gross speculative long positions in Comex silver futures fell 1,717 contracts to 37,322. At the same time, short positions rose 7,773 contracts to 46,067.
Silver positioning is net short 8,745 contracts. This is the largest silver short since June 2019. During the study period, silver prices dropped significantly to $19,008 an ounce, the lowest price since July 2020.
Silver is significantly underperforming gold, with the gold/silver ratio exceeding 90 points last week, hitting a two-year high.
Also, silver is not only suffering as a monetary metal as the Federal Reserve is tightening interest rates at breakneck speed. But the Fed's stance also reinforces fears that the US economy will slip into a recession, putting pressure on industrial demand for silver, which accounts for about 60% of the market.
Growing recession fears can be seen in the copper market as hedge funds remain bearish. However, the market may be on the verge of a reversal.
Copper's disaggregated report showed that money-driven gross speculative long positions in high grade copper futures on the Comex rose by 5,809 contracts to 38,877. At the same time, short positions rose at an even faster pace by 6,777 contracts to 65,604.Positioning in the copper market remains bearish as the net short position widened to 26,727 contracts.
In the current environment, the base metal continues to struggle. During the study period, copper prices dropped to $3.35 an ounce.
Commodity analysts at TD Securities see the potential for copper to rebound from its recent lows.