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Even though hedge funds continue to sell gold, the sell-off storm is almost over. Based on data from the Commodity Futures Trading Commission (CFTC), hedge funds continue to dump gold, but soon the scales may tip in favor of the precious metal again. The CFTC's disaggregated report on traders' commitments, released on March 9, indicated a decrease in speculative long positions of financial managers by 10,385 contracts for gold futures, to 96,223 contracts. And an increase in short positions by 6,145 contracts, to 66,793 contracts.
This suggests that such a large number of long positions in the balance does indeed reduce the risk of further price declines since most of the weak players are likely to exit the market by now.
But we should not forget that there will be a two-day meeting of the Federal Reserve's Open Market Committee (FOMC) this week, which starts on Tuesday morning and ends on Wednesday afternoon, also during the American session, with a statement and new US economic forecasts. And although no changes are expected in US monetary policy, even though US Treasury Secretary Janet Yellen said on Sunday that inflation risk in the US is controlled and managed, it is worth paying attention to the wording regarding economic growth and the prospects for inflation.
Inflation is growing faster than the Fed predicts, especially in light of the rapid rise in US Treasury yields. And the Fed is not going to take control over this yet.
The current correlation between profitability and gold is that when profitability rises, gold falls. This may change in the future, and once it does, gold could skyrocket.
So far, Fed Chairman Jerome Powell has ignored rising yields and downplayed rising inflationary expectations by arguing that any price increases would be temporary. But over time, this issue will have to be resolved. The Fed's announcement on Wednesday will be a key driver for the precious metals sector this week.
Investors should closely monitor whether there will be changes in the Fed's decision.
In the silver market, hedge funds continue to ditch bullish rates. The detailed report indicated a decrease in long positions on the Comex, by 3,096 contracts, to 55,268 contracts. And an increase in short positions by 103 contracts, to 28,942 contracts. The net length of silver is currently 26,326 contracts.
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