Gold Faces Pressure as Speculative Positions Surge
Hedge funds have re-engaged with the gold market after a period of relative inactivity, yet analysts caution that increased speculative positioning could lead to further liquidation. Gold prices, unable to sustain new record highs achieved last week, are under scrutiny.
According to the CFTC’s disaggregated Commitments of Traders report for the week ending July 14, money managers boosted their speculative gross long positions in Comex gold futures by 34,520 contracts, bringing the total to 216,502. Concurrently, short positions increased by 7,455 contracts, rising to 20,510.
Gold’s net length surged to 184,532 contracts, marking its highest level since March 2020. The precious metal experienced its most significant speculative uptick since March, when prices surpassed $2,150 and climbed to a peak of $2,448 per ounce.
Despite recent consolidation, with gold prices holding firm amid strong safe-haven demand driven by geopolitical uncertainty and central bank purchases, analysts warn that the recent price surge could prompt profit-taking.
Gold reached a new all-time high above $2,480 an ounce last week, but has since faced considerable selling pressure. As of the latest trading session, August gold futures were priced at $2,386.60 an ounce, reflecting a 0.52% decline on the day.
TD Securities highlighted in a Friday report that the recent rally introduced asymmetrical downside risks for gold for the first time in months. “Our analysis suggests that the window for downside is open, and a pause in gold’s bull market may be forthcoming,” the report stated.
Although TD Securities anticipates a potential drop in gold prices below $2,380 in the short term, they maintain a long-term bullish outlook on the metal.
Julia Cordova, founder of Cordovatrading.com, advised that gold must maintain support between $2,373.50 and $2,381.20 to sustain its breakout momentum. While she does not view last week’s rally as a false breakout, she warned that failure to hold these support levels could see gold prices retreat to $2,325.
James Stanley, Senior Strategist at Forex.com, expressed that the selling pressure is not unexpected given that momentum indicators have moved into overbought territory. Nevertheless, he remains optimistic about gold’s prospects due to strong fundamental support.
In contrast, the silver market continues to face challenges. Hedge funds have been hesitant to make significant moves in silver, as reflected in the disaggregated report. Money-managed speculative gross long positions in Comex silver futures increased by 686 contracts to 55,858, while short positions rose by 1,913 contracts to 19,183. This slight increase in short positions reduced silver’s net length to 36,675, showing minimal change from the previous week.
Silver prices fell sharply below $30 during the survey period, with September silver futures last trading at $29.22 an ounce. Cordova remains hopeful that silver can recover, noting, “Silver has followed through on the confirmed weekly bearish divergence, but if it can regain $29.855, it is likely to outperform gold this week. Strong support is seen at $28.41.”
Overall, while gold’s immediate future appears uncertain amid speculative pressures, the outlook for silver remains cautious as investors await further developments.
