Speculators Cut Bullish Metals Positions as Prices Fall

Analysts say strong hands will replace 'shaky ones.'"

Price drops because of demand worries related to the Japanese earthquake and tsunami weighed on precious and base metals prices and speculators cut bullish futures and options positions, according to U.S. government data.

In the week ended March 15, the U.S. Commodity Futures Trading Commission noted in both its disaggregated and legacy commitment of traders reports – futures and options combined – that speculators cut back on longs for most metals.

Speculators exited long gold positions, cutting 9,391 gross long contracts and adding 2,991 gross shorts in the disaggregated report, cutting the net-long position to 183,908 contracts. Producers and swap dealers both cut gross shorts and added to gross longs, lowering their net-short position.

A similar move was seen in the legacy report, with the non-commercial traders cutting 17,342 gross long contracts and adding 3,116 gross shorts, lowering the net-long to 205,615 contracts. The commercial traders lowered their net-short position by cutting shorts and adding longs.

Managed-money funds cut their net-long position in silver by reducing 1,940 gross longs and 243 gross shorts, dropping the net-long position to 33,064 contracts. The producer group also cut from both sides, but cut more shorts, lowering their net-short stake.

Commerzbank analysts said in a research note Monday that the drop in both gold and silver net-longs was expected and likely continued beyond March 15. This isn't troubling to them, however. "Some long-term investors have evidently used the slump for increased buying. This trend is therefore positive for markets overall, as it means strong hands replace 'shaky' ones on the market," they said.

As the platinum metals group prices fall from pressure related to Japanese automotive demand, speculators continue to exit the bullish side of that market.

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