Speculators Continue to Add Positions in Gold, Silver

"Rise in speculative positions came on new long positions and shorts covered.

Speculative investors are continuing to add bullish positions in gold and silver futures and options, according to information released by the U.S. government late Friday.

In the week up to Feb. 15, speculators increased their net-long positions for Comex gold and silver futures and options combined, as noted in the weekly commitment of traders report, released by the Commodity Futures Trading Commission, the governmental oversight agency for the futures industry. Meanwhile, speculators sliced net-long positions in the platinum group metals and copper.

Commerzbank analysts said for the month of February, gold prices have risen more than $70 already. "Two major factors are likely to be at play here: Firstly investors are increasingly seeking a 'safe haven' again amid the growing unrest in the Middle East and their demand for gold is therefore stronger. Secondly, the price is being driven by speculative financial investors," they said.

Managed-money accounts in gold saw their net-long position in the disaggregated report rise to 159,814 contracts as they added 7,925 gross longs and subtracted 6,094 gross shorts. Producers added both gross longs and shorts, but added more shorts, increasing their net-short position. Swap dealers cut gross longs and added gross shorts, raising their net-short position.

In the legacy report, non-commercial traders added gross longs and cut gross shorts, increasing their net-long position to 199,425 contracts. Commercial traders increased their net-short position.

Barclays Capital said the rise in speculative gold positions came on new long positions being established and shorts covered. These non-commercial positions are back to one-month highs.

Even with the jump in net-long contracts for funds, Commerzbank said these positions are still well below October's peak, meaning there is still upside potential, which should support gold prices.

Speculators are adding to their silver net-long, pushing their position to the highest level since November.

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