Gold buyers returned to increase the net-long by 8% to 229k lots. While total holdings in exchange-traded funds backed by bullion continue to reach new record highs, the futures net-long has held within a 200-300k range since last July. Hedge funds maintain an elevated bullish position but are currently reluctant to add more amid the confusing signals from the wider market. While being supported by negative real yields and COVID19 growth worries investors also have to consider the fact that U.S. stocks continue to grind higher and now also renewed dollar strength.
Despite advancing by 1.6% during the reporting week, HG copper selling nevertheless continued with funds increasing their net-short by 26% to 59k lots. Since the COVID19 outbreak became known funds sold 66k lots during a three-week period and these positions are now being exposed to short-covering as the market responds positively to Chinese pledge to support the economy. With much of China still off-line there will be a demand shock which may limit the upside potential until the scale of the disruption becomes known.
Having broken back above $2.60/lb the short-term risk, baring any renewed worries related to COVID19, could see copper trade towards its 200-day moving average at $2.67/lb.