The gold price remains under pressure. Banks have built up as many short positions in futures trading as never before. The net short position of this group of dealers is already 20 percent below the August record.
Consolidated gold price
The gold price has been going through a period of consolidation since the beginning of September. This Monday at 10 o’clock, the troy ounce of gold on the spot market cost 1,462 US dollars. That corresponded to 1,321 euros. In the US forward market, we have seen a significant increase in gold futures trading activity in recent months. Financial institutions play an important role. The US Securities and Exchange Commission publishes its participation in futures trading at the beginning of the month. And that’s what the latest numbers look like.
Banks in record high short
The gold-trading banks on the US commodity exchange COMEX reported higher forward sales than ever before as part of their futures positions. This is shown by the current, monthly Bank Participation Report of the US Securities and Exchange Commission CFTC. Accordingly, the banks were on December 3, 2019 gold at 316,666 contracts on the sales side. That’s the equivalent of 984 tonnes of gold. The share of this short position in the total open interest, ie the total of all open gold contracts on the COMEX, was 45.2 percent (see red graph below). A total of 36 banks participated in these transactions. Such a high short concentration on the part of the banks was revealed at the beginning of 2013.
Net short position below all-time high
However, the pure long positions of the banks reached an all-time high with 111,442 contracts. This results in a net short position of this dealer group of 205,224 contracts for this time. That is 1.3 percent more than in the previous month, but 20 percent less than the record high last August. At that time, the banks were netto-short with 214,856 contracts. At the beginning of December, the net short position of the US banks (4 institutions) fell by almost 7 percent to 100,534 contracts. There were already significantly higher values in the past – for example in September 2017 with 127,483 contracts. Nevertheless, the level is still significantly higher by historical standards.
Gold price and banks
Classification: The higher the (net) short position of the banks, the greater their interest in a falling gold price. But if the trading activities in the gold futures increase overall (open interest), of course, the involvement of the banks. Because they often (also known as market makers) take the opposite position of speculative traders. And the open interest has reached historic highs again and again. Read more about this in our weekly CoT reports (Gold price falls – That happened on the US futures market).