Remain constructive on gold over the long term

CFTC (Commodity Futures Trading Commission) data, released on Friday
21 October 2011, reveals the following

1. After only modest improvements in the net position over the previous two weeks, the past week’s deterioration confirms that the speculative market is indeed cautious about gold’s short-term prospects.

However, positioning remains uncommitted either way, so participants don’t seem particularly worried about the gold price falling off a cliff.

Along with prices, net speculative length decreased, although only moderately, with only 25.8 tonnes lost over the past week. The net speculative position for gold now stands at 514.4 tonnes — within touching distance of this year’s low (510.4 tonnes) recorded four weeks ago when prices fell 8.6% w/w. The change in the net position was mostly the result
of speculative longs being unwound (24.3 tonnes), with the increase in speculative shorts (1.6 tonnes) contributing marginally.

After only modest improvements in the net position over the previous two weeks, the past week’s deterioration confirms that the speculative market is cautious about gold’s short-term prospects. However, positioning remains uncommitted either way, so participants don’t seem particularly worried about the gold price falling off a cliff.

ETF holdings continue to climb, albeit modestly (4.7 tonnes), another indication that markets remain uncertain about gold’s direction over the next few weeks.

We remain constructive on gold over the long term.