COT: Record gold short while oil sees no selling appetite

Gold remained under pressure last week from the stronger dollar and EM weakness. In response to the technical break below support at $1,205/oz, the net-short jumped by 13% to a fresh record of 77,000 lots. The market is currently transfixed by the negative impact on those EM economies maintaining large external debt in dollars at a time where both the dollar and funding costs are rising.

With such an elevated short, the risk of a snap recovery has risen and on that basis the market will be pay extra attention to the dollar, which has weakened a bit in response to new low level trade talks between the US and China, as well as Federal Reserve chair Jerome Powell speech on Friday at the Fed’s annual Jackson Hole conference.

Should Powell unexpectedly blink and signal a slowdown in the tightening process, the dollar could get sold and potentially send gold on a path to recovery. In silver the net-short jumped by 61% last week but at just 20,000 lots it remains just half of the record from April.

Copper, often seen as a gauge of the global economy’s health given its diverse usage profile, has falling by more than 20% from the four-year high reached just a few months ago back in June. Last week saw copper troubled by news that a potential supply disruption from the world’s largest mine in Chile that had been looming for weeks showed signs of being averted. Hedge funds, however, remained undecided in the week to August 14 with reductions in both long and short positions helping to cut the net-short by just 2% or 507 lots. The cut-off day, though, was just before the price slumped by 4% last Wednesday in response to Chinese growth worries.