URGENT UPDATE: Hedge funds are making significant moves away from precious metals just as gold and silver prices plummet. Recent positioning data reveals that funds began cutting their exposure to these metals before the dramatic sell-off, which has left investors reeling.
As of 12:56 a.m. ET on Tuesday, spot gold was trading at approximately $4,829 per troy ounce, marking a sharp decline of over 10% from its record high of more than $5,500 just last week. Similarly, spot silver prices have plunged to about $83.40 per ounce, down over 30% from its peak of over $121.
According to the Commodity Futures Trading Commission, hedge funds are reallocating their investments, shifting from gold and silver to energy markets amid rising volatility. Ole Hansen, head of commodity strategy at Saxo Bank, noted that the latest Commitments of Traders report highlights this trend, showing a marked reduction in long positions for gold, silver, and platinum.
This pivot comes as energy markets gain traction; US West Texas Intermediate crude oil is now trading around $62 per barrel, up about 8% this year. Long positions in crude oil futures are at their highest level since August, indicating a strong investor sentiment shift.
The heavy pullback in silver bets has left funds with “plenty of room” to re-enter the market once volatility stabilizes. However, analysts warn this recovery could take time following the recent meltdown.
The dynamics of the market were exacerbated by significant trading volumes across futures and options, as well as speculative trading leading up to the end of January. Jeffrey Christian, a veteran commodities analyst, highlighted that the market mechanics, fueled by President Donald Trump’s nomination of Kevin Warsh for the Federal Reserve Chair, intensified the downturn.
While the fundamental drivers for precious metals remain—geopolitical tensions and central bank purchases—the recent correction serves as a stark warning for momentum traders. Hansen noted, “When gold and silver become popular topics in casual conversations, it often signals that a phase of the rally is nearing exhaustion.”
Investors are advised to stay alert as the situation develops. This rapid shift in trading strategies underscores the urgency of understanding market dynamics in real-time, especially as prices continue to fluctuate dramatically.
Stay tuned for more updates on this evolving story as it impacts your investment decisions and the broader market landscape.
