(Kitco News) – The US dollar continues to dominate gold and silver as last week’s 20-year high prompted hedge funds to liquidate their bullish bets and increase their bearish exposure.
However, analysts warn that profit-taking in the US dollar could squeeze precious metal short sellers, which appears to be happening in the silver market as prices rise 6% at the start of a new trading week. testing resistance at $ 20 an ounce.
All eyes are currently on silver as the precious metal sees its best daily gain in a year. The rally in silver comes as hedge funds have pushed their bearish bets to the high of the past three years.
“The reversal of the real dollar is catalyzing a fierce short squeeze on silver. After all, with the money manager’s short positioning on silver rising to the highest levels since 2019, a bearish consolidation of the dollar has pushed participants. to run to the exit, “commodity analyst TD Securities said in a report Monday.
The CFTC’s breakdown report on traders’ commitments for the week ending 6 September showed that money managers increased their speculative gross long positions in Comex silver futures by 2,718 contracts to 33,857. At the same time, short positions increased at a still fast pace of 6,430 contracts to 58,600.
Silver’s net short positioning now stands at 24,743 contracts, up more than 17% from the previous week. This is the third consecutive week that the silver market has seen an increase in bearish bets.
During the survey period, silver prices fell to an over 2-year low at $ 17.40 an ounce.
“The silver bears have the overall short-term technical advantage. However, the bulls have momentum on their side to suggest a market low is in place,” said Jim Wyckoff, senior technical analyst at Kitco.com.
Although silver is currently benefiting from a short squeeze, some analysts don’t know if the rally is sustainable. Nicky Shiels, Head of Metals Strategy at MKS, said silver has room to rise to the upside in the near term.
“Over the medium term, as long as the US dollar remains in a structural uptrend, silver rallies will be short-lived unless fundamentals are recognized and remain strong,” he said.
Gold is also benefiting from a weaker US dollar, but it is not seeing the same price action as silver, even as bearish hedge funds continue to dominate the market.
The breakdown report showed that money-managed speculative gross long positions in Comex gold futures fell by 5,919 contracts to 85,842. At the same time, short positions increased by 12,831 contracts to 92,804.
After a month of holding in bullish territory, the gold market is back short of 6,692 contracts.
During the survey period, gold prices dropped to $ 1,700 an ounce. However, the market has since recovered thanks to the weakness of the US dollar; investors are waiting to see if prices can return to $ 1,750 an ounce.
While gold has room to rise to the upside in the near term, many analysts don’t expect to see a sustainable breakout anytime soon.
Currency analysts said the US dollar remains the most attractive global currency as the Federal Reserve maintains its aggressive monetary policy stance.
I am still bullish on the US dollar because the Fed is in a better position to instill confidence in its currency than the Bank of England or the European Central Bank, “said David Madden, market strategist at Equiti Capital, in a recent interview with News. Kitco.
Brown Brothers Harriman currency analysts also remain bullish on the US dollar and see the current price movement as a short-term correction.
“In our view, nothing has changed substantially and the global environment continues to favor the dollar and US assets in general,” analysts said.
Some King Dollar profit-taking is also benefiting the base metals sector as hedge funds hold a slightly bearish stance on copper.
Copper’s disaggregated report showed that money-managed speculative gross long positions in Comex high-quality copper futures fell by 1,074 contracts to 36,543. At the same time, short positions increased by 1,392 contracts to 47,676.
The positioning in the copper market remains bearish as net shorts remained relatively unchanged at 11,133 contracts. Speculative positioning on copper weighed on prices, which managed to maintain the support at $ 6.40 per pound.
The global economic outlook remains bleak and recession fears continue to rise, which continue to pose a risk to copper; however, Darin Newsom, president of Darin Newsom Analysis, said the market is experiencing solid bullish technical momentum.
“We may not know the real reasons why copper is recovering, but the new uptrend is based on buying interest in both commercial interests. Non-commercial interests have been slow to react, as seen in recent CFTC Commitments of Traders reports (legacy / futures only, the only one that matters), with the last week showing an increase in the net position on the group’s short futures. This opens the door to a stronger rally in futures when this group it will start hedging those short futures, “he said in a statement Friday.
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