According to the latest trading data from the Commodity Futures Trading Commission (CFTC) of the USA, fund managers are beginning to recognize the value of gold and silver as they increase their bullish bets on them.

The net long position for gold is currently 193,305 contracts. This bullish speculative position has risen to its highest level since early March 2020, when the Federal Reserve cut interest rates by 50 basis points in an emergency meeting in the face of the initial impact of the COVID-19 pandemic.

Despite gold reaching historic highs and silver being at a six-week high, analysts note that the precious metals market is not overheated and there is virtually no speculative bubble in the market.

Although speculative positions have reached their highest level in four years, some analysts point out that the process has been relatively slow. Since March this year, speculative activity has remained relatively stable. Joy Yang, Head of Product Management for MarketVector Indexes Global Index Products, said in an interview that gold is building a solid foundation for further record highs.

Nicky Shiels, Head of Research and Metal Strategy at MKS PAMP, said that the scale of inflows seen last week was about a quarter of the inflows seen before the interest rate cut cycle in 2019. However, she noted that the current open interest level has exceeded the previous cycle.

Shiels said that even with high speculative positions, there is still room for gold to rise further.

In her report last Friday, she wrote, "Not all investors have fully fired up their engines, and with the confirmation of 'Powell Pivot' and possible further weakening of the US dollar, it is expected that inflows will accelerate until the end of the election."

For most of this year, investor demand has played a minor role in the gold market, as prices have been primarily driven by record purchases from central banks and demand from Asian retail investors. However, analysts predict that with the Federal Reserve entering a period of easing next month, investors will start to show greater interest in gold.

Commodity analysts at D.A. Davidson said in a report last Friday: "As CTA trend followers wane, these capital flows primarily reflect self-directed fund managers, who have become more bold due to the upcoming rate-cut cycle, geopolitical issues, deficits, low interest rates, and a weak U.S. dollar, with their net long positions growing to extreme levels."

Eric Stand said in an interview that the gold market has yet to fully realize its potential.

While gold is still in a long-term uptrend, Stand also warns investors that high speculative positions could cause short-term volatility in the market. Analysts say that any weakness in the U.S. stock market could trigger a liquidity event and put pressure on gold.

As silver prices remain above $29 per ounce, investor interest in silver is also increasing.

A breakdown report shows that managed speculative net long positions in Comex silver futures increased by 3,712 contracts to a total of 39,517 contracts. Short positions decreased by 2,793 contracts to 9,678 contracts. The net long position in silver is currently at 29,839 contracts, a one-month high. During the survey period, silver prices rebounded to above $30 per ounce. The gold-to-silver ratio is currently around 84, down from 90 at the beginning of the month.

Analysts point out that gold and silver continue to benefit from the weak U.S. dollar, which has fallen over 4% since the beginning of the month.

Editor / rocky