FX.co ★ Hedge funds prefer silver and copper

Hedge funds still don't want to invest in gold. However, according to some analysts and to the latest data from the Commodity Futures Trading Commission, silver is viewed with more interest than gold, as industrial demand increases.

Based on the opinions of economists, inflation concerns have caused renewed interest in base metals. At the same time, the depletion of stocks as demand increases has led to a significant imbalance of supply and demand. Copper and silver began to be in demand.

Inflationary distress, which has reached its highest level in 16 years, is proven by the five-year break-even level. The break-even rate is the difference in yield between bonds and Treasury securities with inflation protection (TIPS). The difference is the level of inflation needed to equalize their incomes. As of last week, the break-even rate was 2.91, the highest level since 2005.

The CFTC's disaggregated report on traders' obligations for the week shows that speculative long positions on Comex for silver futures increased by 2,593 contracts, to 50,040 contracts. At the same time, short positions fell by 11,788 contracts to 30,603 contracts.

The net length of silver is now 19,437 contracts. Ole Hansen, head of the commodity strategy at Saxo Bank, noted that the gray metal's net length has more than tripled compared to the previous week.

Many analysts note that silver is gaining momentum due to rising prices for non-ferrous metals, as copper prices have reached record highs since May. So, hedge funds have increased their long positions on copper. This is noticeable in the stocks in the warehouses of the London Metal Exchange, which drop to the lowest level since 1974.

A detailed Copper report showed that speculative long positions on high-quality copper futures on Comex increased by 15,981 contracts, to 81,574 contracts. At the same time, short positions decreased by 2,567 contracts, to 28,400 contracts.

The net length of copper currently stands at 53,174 contracts, which is 53% more than the previous week.

Despite the fact that the fundamentals of supply and demand for copper may continue to support prices, Commerzbank's non-ferrous metals analyst Daniel Briesemann warned that the market seems to be oversold.

Compared to silver and copper, the gold market has been extremely calm.

A detailed report showed that speculative long positions on Comex gold futures fell by 7,108 contracts, to 124,560 contracts. At the same time, short positions also did so by 6,388 contracts, to 66,761 contracts.

The net length of gold is 57,799 contracts, which is relatively unchanged compared to the previous three weeks.