What Are Hedge Funds Waiting For For Gold? What will be the price?

Not surprisingly, hedge funds significantly reduced their short-term gold bets. However, according to the latest information from the Commodity Futures Trading Commission (CFTC), they are reluctant to take any big bull status at random.

“Short squeeze for gold will eventually fail”

Koindeks.com As you follow, gold saw an impressive short-term rally last week. In this rally, gold prices hit a one-month high. However, the market has not always benefited above $1,700. Analysts say the speculative bear position at several-year highs will keep the bottom volatile and sensitive to short squeezes. However, gold will struggle to sustain any bullish momentum as the Fed continues to aggressively raise interest rates. Commodity analysts at TD Securities comment:

The rising persistence of inflation indicates that it was not expected that the Fed would preemptively halt the march. This suggests that the short squeeze will ultimately fail as technical resistance remains while interest rates and the broad dollar rally continue. In the period of long-term restrictive rates, traders need to ignore gold’s siren invitations. Because it suggests that a bearish trend will always prevail and QT will continue to increase real rates.

“Gold is likely to stay on the defensive”

According to the CME FedWatch Tool, the market sees an 85% chance for the Fed to raise the Fed Funds Rate another 75 bps in November. Commerzbank commodity analysts say real interest rates are on track to rise to 1.7%, their highest level since August 2009. Analysts comment:

This makes gold less attractive as an interest-free investment. Gold is expected to remain on the defensive as long as the headwind and rising real returns from the US dollar continue.

“Last week, 4.7 billion dollars of funds flowed into the gold market”

For the week ended Oct. 4, the CFTC’s disaggregated Commitments of Traders report showed that money managers increased their speculative gross longs on Comex gold futures to 8,635 contracts to 82,806. At the same time, shorts fell by 27,584 contracts to 89,681.

Net short positioning of gold is currently down 84% compared to the previous week. As a result, it stands at -6,875 contracts. Gold’s bearish position is at its lowest level since early August. During the survey period, gold rose to $1,738.70.

It also jumped 7% from a multi-year low the previous week. Commodities analysts at Société Générale say $4.7 billion in funds poured into the gold market last week. It also notes that it’s the third-largest breakthrough since the CFTC began its updated survey in 2006.

“Yellow metal did more than it should”

Gold continues to struggle with the strong bullish momentum in the US dollar and rising bond yields. Nicky Shiels, head of MKS PAMP metals strategy, says there is a measure of strength in the market. Based on the data, he notes that gold has extended its move by around $50. Shiels continues his assessment in the following direction:

Gold overdid due to some additional unknown purchases and known flows indicating a lack of vendors. Bullion is often attractive when it is perfectly clean as is the positioning. However, this assumes that ETFs are idle HODLs. Unless a gold-specific catalyst emerges, COT shorts are pak. Also, it’s possible for ETFs to kick in again as they continue to flow into higher real interest rates and US dollars.

“Probably the gold market will continue to struggle until the end of the year”

The US economy continues to lose momentum and the threat of calm continues to grow. However, according to a precious metals firm, the Fed will continue to tighten its monetary policies. As such, this will keep bullion prices low for a longer period of time. Commodities analysts at Heraeus Precious Metals warn investors in their latest precious metals reports that the gold market will likely continue to be strained through the end of the year as rising interest rates support the US dollar.

There’s something that helps pull the bottom down. That is, the market continues to force any possible random change in US monetary policy. Markets do not foresee that the Fed will return from the path of rate hikes by the end of 2023. Analysts highlight the following issues in the report:

The Fed is far behind the curve in effort with inflation still well above the 2% target rate. Moreover, the supply-side element of the current inflation crisis cannot be resolved by interest rate hikes. This means that demand-side inflation must be suppressed more firmly. The Fed must be willing to endure a valuable contraction in manufacturing if it is to keep inflation down to target levels. He last had to do this in the early 1980s.

Heraeus says the gold of the Fed’s monetary policy axis remains the critical factor for the latest recovery. Analysts make the following statement:

Markets are hoping that the dollar will start to depreciate when a slowing US economy pushes a Fed policy axis. As a result, he expects the gold price to increase. The longer the Fed continues on its current path, the longer a strong dollar will push the gold price down.

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