Gold and precious metal longs surge - TDS

According to the CFTC commitment of traders report for the week ending August 15th, 2017, gold and precious metal specs increased their net length last week, as investors aggressively grew their long position and covered short exposure.

Key Quotes

“A recent flare-up in tensions with North Korea along with a disappointing US CPI print helped propel the complex to recent highs. Despite Korea tensions somewhat easing earlier in the week, we expect net positioning to continue growing in the precious metals complex amid a dovish tone expressed in the Fed Minutes, continued turmoil in Washington and upcoming military drills in the Korean peninsula.”

“WTI Crude specs cut net length again this week, as more long positions were liquidated compared to the amount of shorts covered. Investors took profits whenever WTI attempted to move above the $50/bbl mark, despite continued heavy reductions in US inventories. The large build in gasoline stocks along with the IEA report showing a decline in demand and elevated non-OPEC supply expectations, which saw fears of oversupply reemerge, also helped pursued investors to close out long positions. But moving forward, continued large inventory reductions and rig count reductions that suggest the positive production growth momentum should moderate somewhat into 2017, should help push crude higher.”

“Continued positive momentum emanating from broad base metals optimism, in the aftermath of planned Chinese smelter closures, and technical factors prompted specs to aggressively grow their net long copper exposure. At the same time, the fact that prices have surged to the very top of the cost curve, at a time the market has massive amounts of above ground inventories which can mitigate any pending primary deficits, has also persuaded money managers and tactical funds to hike their short exposure. At this stage, the copper market has extreme levels of shorts and longs, suggesting substantive directional moves in either direction are possible.”