Hawkish Fed spooks hedge funds to take some profits in gold, but sentiment remains solidly bullish

Hedge funds continue to take profits in gold as the Federal Reserve ratches up its hawkish rhetoric and safe have demand continues to weaken, according to the latest data from the Commodity Futures Trading Commission.

Many analysts note that the latest trade data shows there is still a lot of bullish sentiment in the marketplace; some traders have said they see strategic opportunities to enter the gold market at lower price levels.

In a recent interview with Kitco News, David Madden, market analyst at Equiti Capital, said that although markets will remain volatile, gold has held up well even in the face of rising interest rates and bond yields.

“There is very little that could derail the rally to higher prices,” he said.

The CFTC disaggregated Commitments of Traders report for the week ending March 22 showed money managers lowered their speculative gross long positions in Comex gold futures by 13,008 contracts to 152,589. At the same time, short positions fell by 1,603 contracts to 37,457.

Gold’s net length now stands at 115,132 contracts, down 9% from the previous week. During the survey period, gold prices were capped just below $1,950 an ounce. Daniel Briesemann, precious metals analyst at Commerzbank, said bullish speculative positioning is at a six-week low.

However, while speculative positioning has dropped, Briesmann noted that demand for gold-backed exchange-traded products remains solid. He noted that global gold ETFs have seen ten weeks of consecutive inflows.

Ole Hansen, head of commodity strategy at Saxo Bank, also highlighted strong EFT demand as speculative interest dropped.

“On Friday, total holdings reached a 13-month high at 3289 tons, up 95 tons during the past month,” he said.