Tuesday, August 3, 2010

Futures Funds Shying Away From Going Long Gold

Brad Zigler of Hard Assets Investor reveals futures fund managers have been switching away from gold longs, and increasingly are going short.
At first, traders were content just to abandon the gold market. As of July 13, 118 funds held long futures positions while 24 were short. A week later, 107 long accounts remained. The short side only picked up one. This past week, though, when 17 funds liquidated their long positions, nine players switched sides to go short. There haven't been this many funds short since November 2008.

Granted, these aren't large short positions. Money managers are still net long — and, at better than 154.000 contract equivalents, by a sizable margin. But, less than 73 percent of them are long now, down from 87 percent just a month ago. The ratio hasn't been this low since April 2009.

Clearly, the speculative gold segment has been rejiggered over the past couple of weeks. The backdrop to this has been liquidation. The market's gotten notably smaller, shedding 7.7 percent of its open interest. The closeout has been universal, as commercially — the usual counterparties to fund managers' trades — have peeled away as well....
He ends with a question that, I'm sure, is going through many minds: is this the sign of a revival of an intermediate-term rise or something less? He says trading over the next couple of days will give guidance to that question.


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