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According to the CFTC weekly report (W/E August 14), gold specs continued to add to their net short positioning, which is the shortest since 2001, as the record amount of shorts continue to grow, notes the research team at TD Securities.

Key Quotes

“Persistent dollar strength amid Turkey concerns and EM currency turmoil prompted a break of the $1200/oz support level, which encouraged fresh shorts to bet on further technical downside. Precious metals will likely remain under pressure in near term, requiring some stability across EM and easing dollar strength before making a material recovery.”

“Investors marginally increased exposure to copper, as more shorts took profits in comparison to longs who liquidated. It is likely further longs exited this week as European contagion fears from Turkey, on top of existing uncertainty stemming from China-US trade wars, saw traders worrying demand for the red metal could take a hit. In addition, news of a likely deal at Escondida to avoid a strike, was the straw that broke the camel’s back and saw prices fall below $6000/t and into a bear market. But, as the underlying fundamentals remain attractive and a more encouraging sentiment surrounding trade begins to prevail, prices should recover off the lows moving forward.”

“WTI crude specs lightened their exposure again this week as risk-off sentiment and technical traders liquidated longs and drove prices to the lower bound. A large inventory build along with data showing that the Chinese imported 0 barrels of oil from the US so far in August, despite removing oil from the tariff list, also helped to fuel the bearish sentiment on the week. But with risk appetite recovering somewhat amid news of China-US trade talks, along with the ample global supply risks, oil looks poised to recover back toward the upper bound.”