GOLD'S recent price drop below $1600 per ounce is primarily due to action in the gold futures market, according to analysts today.
Reviewing latest data from US regulator the Commodity Futures Trading Commission (CFTC), they point to last week's sharp increase in the volume of bearish betting on the future gold price by so-called "speculative" traders.
In fact, these non-commercial players, meaning traders outside the miners and processors, cut their "net long money in 22 [commodity markets]," says INTLFCStone's Edward Meir, "falling by nearly $13 billion to $69 billion."
Meir attributes that move to "pushing the 19-commodity Thomson Reuters-Jefferies CRB index down almost 2% for its biggest weekly decline in nearly four months."
In gold, prices fell 2.5% as the net long position – the balance of bullish minus bearish contracts held by speculators – shrank at the fastest weekly pace in 55 months. Down by more than one-fifth on the US gold futures and options market, it hit the lowest level since the Lehmans Crisis of late 2008 at the equivalent of 398 tonnes.
The non-commercials' net long position peaked at 1028 tonnes in August 2011.
Amongst that group, so-called professional speculators raised the number of bearish gold contracts they held by 34% in the week-ending Tuesday 19 February – the cut-off date for the CFTC's latest data. Jumping above 91,000 futures and options contracts, their short interest hit the highest level since at least January 2005, standing 15% above the previous series record.
"As anticipated, gold's latest price slide was largely due to the futures market," says the latest market comment from Commerzbank's commodity team in Frankfurt.
"A massive 97.1 tonnes of net speculative length was lost," says Marc Ground at Standard Bank, noting "the 5-year record increase" in bearish non-commercial bets.
The gross short position held by speculative traders in US gold futures and options has neared or exceeded 60,000 contracts only 5 times before in the last 8 years.
The average 6-month change in gold prices, according to analysis by BullionVault today, has then been +28%.