Spot gold prices continued their recent sell-off on Tuesday – chart via Kitco:
And in case there was any doubt, last week’s rumours of significant speculative liquidations appear to have been confirmed by CFTC futures data.
The figures out last Friday showed that money managers cut their long gold futures positions by 18 per cent last week.
Barclays Capital offered a little more context on Monday:
Indeed, the weekly drop in exposure was the second-largest weekly drop since February while non-commercial positions as a percentage of open interest has dropped to 32%, its lowest level since December 2008. In contrast, physical gold ETP holdings remained unchanged at 2087.9 tonnes, less than 15 tonnes of the peak reached in mid-July. However, platinum ETP holdings dropped by 11koz from its peak.
As too did Société Générale’s analysts:
However, recent patterns include very sharp drop off in net long speculative position on COMEX in the first week of July, and the contraction in the outstanding position, from 902 tonnes to 775 tonnes in just one week. This came under heavy liquidation and an increase in short positions. The primary force behind the move was a combination of physical selling in the market above $1,200 and then the heavy unwinding of short euro / long gold positions at the start of the month amid a boost in confidence in the EU position.
Potentially of further significance is that, at just below 30.5%, the speculative proportion of total open interest is at its lowest since the end of 2007. This suggests that those with weak hands have been, to a large extent, swept away from the market, opening the possibility of renewed interest in coming weeks. It also, though, means that the potential for swift short-covering rallies has been reduced.
We for one can’t help noticing a particular US open-trend to trading patterns of late:
But perhaps that was always the case?
Related links:
The story of the gold curve, so far - FT Alphaville
The gold contango trade, charts du jour - FT Alphaville
A GLD contango strategy? - FT Alphaville
Is someone liquidating GLD? – FT Alphaville