Gold has once again proven to be the ultimate momentum asset. According to the latest data from the Commodity Futures Trading Commission (CFTC), unprecedented speculative interest from hedge funds was instrumental in gold reaching an all-time high above $2,200 in the futures market. The question in mind is whether the rally will continue or not!
There was a record flow into the gold market
The CFTC’s disaggregated Commitments of Traders report for the week ending March 5 showed money managers increased their speculative gross long positions in Comex gold futures by 41,221 contracts to 145,106. At the same time, short positions decreased by 12,389 contracts to 35,343. The gold market has a net long position of 109,763 contracts, an increase of 95% compared to last week. Prices rose to $2,150 during the survey period.
Bullish bets on gold by hedge funds are at their largest level on record. However, the total net position is the second largest on record, right behind the significant short position seen in early June 2019. Commodity analysts at Société Général noted that a record $11.3 billion flowed into the gold market as prices rose above $2,050. “The previous largest flow was $9.1 billion in 2019,” analysts said in a note.
Higher prices for gold have been on the cards for a while!
cryptokoin.comAs you can follow from , the size of the rise in gold surprised many people. However, some have been waiting for this breakthrough for a while. “Higher prices have been on the cards for some time,” said Nicky Shiels, head of metals strategy at MKS PAMPs. However, it hit earlier than most analysts expected with relentless buying that made this steady breakout/breakout very different from those in the past,” he says. However, Shiels says he still sees a lot of upside potential for gold.
Those standing on the sidelines are just waiting for the right momentum!
Currently, the market is suffering from lackluster demand. However, SocGen analysts say there is plenty of potential interest lurking on the sidelines. They also state that they are just waiting for the right momentum. SocGen analysts make the following assessment:
The relatively bearish position of money managers at the beginning of our period – relative to the one-year history – left significant dry powder for the observed flow. This was enough to push the commodity into oversold territory according to our OBOS model.
How much momentum does gold have left?
TD Securities analysts say they are exiting tactical long gold positions as the market could face higher volatility even if the uptrend remains intact. In this context, analysts make the following statement:
Looking ahead, the scope for additional gains will increasingly depend on macro trends, given that CTAs are now maintaining ‘maximum long’ position sizes and Shanghai buying activity has increased markedly in recent weeks. Fed expectations are now more closely aligned with macro trader positions, and the crocodile jaws are closing on both sides as market pricing for Fed cuts moderates and macro traders have been forced to close short positions in recent weeks.
Gold investors should be careful because…
Ole Hansen, head of commodity strategy at Saxo Bank, is bullish on gold. However, he says investors should be sensitive to the market’s current speculative positioning. Hansen notes that such traders can reverse their positions very quickly if the market starts to turn.
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