After the worst monthly performance since 2013 and the weakest close since February 2010, it appears “managed money” has piled in to the momentum trade. According to CFTC, hedge funds have never been more short gold (slashing long bets and increasing short bets by around 11 million ounces net in the last week). But gold is not alone as 15 of the 24 commodities tracked by CFTC showed sentiment swinging more bearish last week (with Brent and WTI also at their most-bearish positioning on record). And this is happening as November US Mint gold coin sales rose 86% YoY.
Never. Been. Shorter…
At 1.4 million ounces the market is now in its biggest net short position ever, surpassing bearish positions entered into in July and early August. That was the first time hedge funds were net negative since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.
It’s not just gold that is being swamped by negative sentiment. According to the CFTC, 15 of the 24 commodities tracked turned more bearish last week.
Those include the major commodities like crude oil, copper, soybeans, cotton, corn and wheat where speculators are betting that these commodities will be cheaper in future. Like gold US benchmark oil West Texas Intermediate and North Sea Brent Crude were pushed to the most bearish positioning on record.
But this negative paper gold sentiment is coming at a time when physical gold demand is soaring… (as Constantin Grudgiev explains)
Following October fall-off, sales of U.S. Mint gold coins rose strongly in November to 135,000 oz by weight (+86.2% y/y) and 237,500 units (+95.5% y/y). These figures include sales of both Eagles and Buffalo coins. Average weight of coin sold also rose strongly to 0.5684 oz compared to 0.4709 oz in October and close to 0.5967 oz/coin in November 2014.
As noted in my note covering October sals, October decline was a correction reflective of volatile demand and also significant uplift in sales in previous months. As chart above shows, sales by weight are now well above period average and above peak period average. In 11 months of 2014, US Mint sold 679,500 oz of gold coins; over the same period of 2015 sales totalled 1,020,000 oz.
November 2015 also marked 20th consecutive month of gold sales/price correlations (12mo running) being negative, suggesting strong and entrenched demand from buyers pursuing long hold strategy and taking advantage of improving cost of holding gold.
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