Gold and silver markets remain resilient in the face of mounting challenges, with both precious metals maintaining crucial support levels despite concerns over inflation prompting hedge funds to adjust their positions, according to the latest trade data released by the Commodity Futures Trading Commission (CFTC).
Analysts from Société Générale highlighted that the gold market experienced significant outflows in speculative capital last week, with approximately $6.9 billion exiting the precious metal.
The CFTC’s disaggregated Commitments of Traders report for the week ending February 13 revealed a decrease in speculative gross long positions in Comex gold futures by 13,674 contracts to 100,642, while short positions increased by 20,219 contracts to 66,466. As a result, the net long position in the gold market dwindled to 34,176 contracts, reaching its lowest level since October 16. Despite this decline in bullish interest, gold prices managed to maintain critical support levels at $2,000.
The bearish momentum in gold intensified following the release of the U.S. Labor Department’s Consumer Price Index, which surpassed expectations by rising 3.1% in the 12 months to January. The unexpectedly high inflation figures prompted concerns and led to market reassessment of the potential timing of a Federal Reserve rate cut. Consequently, expectations for a March rate cut have diminished significantly, with less than a 50% chance of easing in May.
While analysts acknowledge the possibility of further downward movement in gold prices, they foresee a solid floor in the market, driven by expectations of eventual monetary policy easing by the Federal Reserve.
Similarly, silver markets have faced challenges amid expectations of prolonged higher interest rates, resulting in bearish positioning. The disaggregated report from the CFTC revealed an increase in money-managed speculative gross long positions in Comex silver futures, along with a rise in short positions. Despite the bearish sentiment, silver prices managed to hold critical support at $22 an ounce, rebounding from a three-month low to conclude the week with a nearly 7% gain.
Analysts suggest that silver, often viewed as a more attractive hedge against inflation compared to gold, could potentially outperform the yellow metal amidst prevailing market conditions.
