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According to CFTC weekly report (W/E July 17), gold specs increased long positions this week but also continued to pile on short positions, which reached a new record as a resilient dollar and continued weakness in the CNH kept momentum to the downside, notes the research team at TD Securities.

Key Quotes

“But, with President Trump criticizing increased rates and a strong dollar, the buck’s upside could be running out of steam, while the outcome of the meeting with the EU’s Juncker ended with a more encouraging sentiment surrounding trade and potential auto tariffs. Indeed, should the dollar’s rally cool off in the second half of the year as we anticipate, the precious metals complex could receive a hefty boost as the record short positions get squeezed out. For now, continued weakness in the CNH should also prevent any near term rallies.”

“Fears that China’s economy was on a swift path towards slower growth were eased as the State Council provided a stimulus package and downplayed their deleveraging narrative in a bid to offset trade angst. And, as BHP presented their final offer to Escondida’s union, copper prices rebounded as money managers increased their long positions. But, the bounce in prices was met with skepticism as speculators also increased their shorts. Given the risk asymmetry and overly bearish positioning, we suspect that copper prices could still have room to run higher.”

“With last week’s bout of negative headlines still freshly embedded in the minds of money managers, speculators opted to sell on the rallies as prices approached $70/bbl and decreased their net length in WTI crude oil. Indeed, while the US President’s aggressive threats on Iran were mostly shrugged off, the bulls will likely be emboldened by tighter inventories and by ARAMCO’s decision to temporarily halt shipping through the Bab el Mandeb strait following Houthi attacks on oil tankers.”