“Sometimes you have to peel the onion when you look at this data,” Crouch said. “It looks like that after such a big drop, people who were short were ready to take their gains. That might also be why the price stabilized, and it could mean that it’s even more vulnerable now.”
Short Holdings
Short positions narrowed 8.2 percent to 59,742 contracts, and longs gained 0.1 percent to 121,321. The short holdings reached a record 70,126 in the week ended March 12, and are still more than triple the average since 2006, when the CFTC data begins.
Assets in ETPs backed by the metal tumbled 11 percent this year as investors shunned the metal in favor of equities and inflation remained subdued. Societe Generale SA said April 2 that the metal was in bubble territory and would fall to $1,375 this year, when it was $200 higher. Goldman Sachs Group Inc. advised traders on April 10 to sell the metal. Prices may need to drop to as low as $1,050 after gold entered a “new reality,” Deutsche Bank AG said April 18.
“This drop happened so fast and so violently,” said Mary Ann Bartels, the chief investment officer of portfolio strategies at Merrill Lynch Wealth Management, which oversees more than $2.2 trillion in assets. “People are asking ‘Why do I have this in my portfolio?’ But when we run the analysis, nothing has changed, gold adds diversification. Unfortunately, sometimes a diversifying asset doesn’t go up.”
Central Bank
Central banks are divided on whether the metal is cheap enough to increase investment. Sri Lanka’s central bank governor said April 16 falling prices are an opportunity for nations to raise reserves. Reserve Bank of Australia’s assistant governor, Guy Debelle, said at a lunch in Canberra the same day that gold has no “intrinsic value.”
Money managers took $3.7 billion from commodity funds in the week ended April 17, said Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Outflows from gold and precious-metals funds totaled $3 billion, he said.
Investors are holding a net-long position in silver of 7,694 contracts, the CFTC data show. That compares with a short position of 560 a week earlier and is the most bullish outlook since Feb. 26. The funds trimmed their net-short holding in copper to 27,412, from 32,850 a week earlier.