Hedge funds turn bullish on gold but remain heavily bearish on silver

Hedge fund investors in the gold market have started earning profits from their short positions as gold prices start to recover after a decline. This happened because the US dollar prices have started to decline after staying strong for 20 years. Another factor behind rising gold prices is the fear of recession amid high-interest rates. This caused the bond yields to decrease and shifted investors’ focus towards gold. According to the National Bank of France, traders betted USD 3.3 billion in the previous week that the gold-stock prices were going to increase. 

The latest gold prices stand at $1,850 an ounce. On 24th May, The Commitments of Traders report showed that various investment managers have increased their long positions and decreased their short positions in gold. This means that most money managers collectively expect gold-stock prices to rise.

Unfortunately, investors don’t have the same expectations for silver. According to the report, there was a larger increase in the gross short positions in silver compared to the long positions. This is because investors intend to make profits from the short positions when silver-stock prices expectedly fall in the future. This is the first time that investors have been so pessimistic about silver stock growth since June 2009. However, despite the market expectations, the price of silver increased by USD 22 recently.

One of the reasons why silver prices are expected to decrease in the future is because of the slowed pace of economic and industrial activity in China. This has lowered the demand for both silver and base metals such as copper. The gross long positions in copper have increased while the short positions decreased by more than 5,000. This indicated that copper is expected to do well in the stock market in the future. Although copper prices recently increased by USD 4.30 a pound, they must become stable before silver stocks sell out.

Tags : bullish on gold, bearish on silver