Hedge funds getting bullish on gold

Stefan Gleason Money Metals Exchange

The gold market has seen many momentum shifts in recent months. At the end of the day, however, the market really depends on one simple factor: Are the big money inflows trending in a bullish or bearish direction?

Near market lows, speculative interest tends to be heavily on the short (bearish) side. That sets the stage for buying pressure to be released when rallies force short sellers to cover their positions.

As traders shift to taking on more long (bullish) positions, momentum builds for higher prices.

Recent data suggests that hedge funds and large market participants are again ramping up their bullish gold positioning and that could take the yellow metal to previous all-time highs… or beyond.

Hedge funds have increased their bullish bets on gold and do not appear to be afraid of recent talk of Federal Reserve tightening sooner than expected.

Latest data from the Commodity Futures Trading Commission (CFTC) shows that hedge funds increased their speculative net long positions in gold by over 10,000 contracts.

Billionaire hedge fund manager Ray Dalio has taken out a sizeable stake in gold, declaring “cash is trash.”

Dalio has also been dabbling in cryptocurrencies. But rival billionaire hedge fund manager Paul Singer calls them “ridiculous,” preferring instead to own tangible alternatives to cash, including gold.

Guggenheim's CIO Scott Minerdi is eyeing an ultimate price target between $5,000 and $10,000 per ounce. “As money leaves crypto and people are still looking for inflation hedges, gold and silver are going to be much better places to go,” he said recently.

Of course, there are numerous reasons why hedge funds and other big players may want to get their hands on gold bullion. Rising inflation worries, easy monetary policies, and a weaker dollar to name a few.

With the stock market possibly at or near its high, the buying in gold has not been limited to U.S. market participants.

Players in other nations have many of the same concerns, and those concerns may keep gold well supported as it approaches its previous all-time highs.

According to IPE.com, a major Swiss pension fund has also traded in its hedge fund and raw materials holdings for gold.

This trend looks likely to continue, especially if precious metals markets continue to float higher.

Against the current backdrop of rising price pressures and a Fed that is willing to let inflation run hot for a long time, institutional interest in gold is likely to increase further.

Gold started the year around $1,918 per ounce, and a move back above that price could trigger additional buying and momentum upward, according to Blue Line Futures Chief Market Strategist Philip Streible.

The gold market tends to swing based on institutional trading momentum. As the yellow metal demonstrates strength, the amount of longs and size of long positions tends to rise.

The opposite is true for when the metal shows weakness.

The current environment in gold suggests much further upside potential ahead.

Concerns over inflation, central bank policies, and currency weakness may all play a key role in gold’s rise. Additionally, a stock market reversal or period of risk-off trade could itself fuel further buying.

With little to no chart resistance above the market at current levels, the ascent in gold could be steep and could happen quickly. Once the train leaves the station, gold prices may not return to current levels ever again.

To receive free commentary and analysis on the gold and silver markets, click here to be added to the Money Metals news service.

Author

Stefan Gleason

Money Metals Exchange

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD picks up extra pace north of 1.1400

EUR/USD extends its recovery past 1.1400 the figure as the NA session draws to a close on Monday. Indeed, the pair advances for the third straight day amid the persistent offered bias in the US Dollar. Meanwhile, market participants keep gearing up for the ECB Forum in Sintra and the release of critical US labour market data.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Strategy unveils plan allowing Bitcoin sales to fund stock buybacks, dividends and reserves

Strategy (MSTR) has unveiled a Digital Credit Framework to strengthen the company’s financial standing. Under the new framework, the world’s largest corporate holder of Bitcoin (BTC) will pivot from its previous accumulation strategy, opting to sell BTC in order to boost liquidity, fund dividend payments, execute stock buybacks, and strengthen cash reserves.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.