(Kitco News) - The latest data from the Commodity Futures Trading Commission (CFTC) show that a lack of safe-haven demand, and growing expectations the Federal Reserve, will raise interest rates in the second half of the year attracting short-sellers to the gold market, said analysts.
Friday, the CFTC reported that speculative money-managed gold long position declined for the third consecutive week, falling by 12,240 contracts to 128,595, as of Feb. 17. At the same time, short positions increased by 11,605 contracts to 32,903. Gold’s net length currently stands at 95,692.
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During the survey period, Comex April gold futures saw a sharp decline, dropping from $1,234.10 to $1,203.30 an ounce, a drop of 2.5%.
Analysts at Barclays said that it appears that established long positions since the start of the year have been “flushed out” of the marketplace as the gold price is hovering close the 2015 opening price.
“But compared with positioning toward the end of last year, net fund length is still elevated,” they said.
Analysts at UBS said the continued length in the gold market means there is further room for the price to fall.
“Specifically, the bigger risk for gold right now is the fact that gross shorts remain relatively lean: the reduction of immediate eurozone risks is likely to encourage shorts – who have been hesitant – to rebuild positions here,” they said.
They added that the fact Greece and its European creditors were able to agree on a four-month funding agreement could lead to a drop in safe-haven demand and that there is “no incentive to rebuild longs at this point.”
Analysts at Bank of America Merrill Lynch, agreed that the technical outlook supports a further reduction of gold’s net length; however, they are expecting to see some base-building between $1,196 and $1,169 an ounce and then for prices to resume its uptrend towards $1,345 an ounce.
The silver market net length was also reduced for the third straight week. According to the CFTC data, speculative money-managed silver long positions dropped by 531 contracts to 48,059. At the same time speculative short positions increased by 4,960 contracts to 15,620. Silver’s net length stands at 32,439 contracts, as of Feb. 17.
During the survey period, Comex March silver futures declined from $16.930 an ounce to $16.378, a decline of 3.26%.