Thursday, May 26, 2016
Funds Are Moving Out of Record Gold Position
Gold advanced into late-April along with a weaker path for the dollar index. We are seeing strong signs for the price of gold to continue to reverse those gains at an accelerating pace. Since the start of the year, CFTC ‘non-commercial’ aka ‘large spec’ accounts - which include hedge funds, have moved to record net long positions in gold. Open interest too had grown to multi-year highs, increasing 42% since the start of the year. Soros and other have become vocal for bullish positioning.
Will modest dollar strength along with a renewed Fed in ‘normalization’ cause a major gold sell-off as weak players exit longs?
Yesterday, gold futures aggregate open interest declined by 18,000. This is the largest single session drop in open interest since November. Since late January, open interest had risen by 224,000 or 60% from 373K to 597K. Since May 16, open interest has declined by 12%. This is an indication, punctuated by the step-up in activity yesterday, that longs are exiting their record positions.