Net long positions on US commodity exchange COMEX fell 5% in the week to May 31 to 148,611 contracts, its lowest level in 10 weeks, Commodity Futures Trading Commission data showed Tuesday.
The bullish money-manager positions were down from 156,461 contracts reported last week, having declined from five-year highs of 218,895 net long contracts at the beginning of May.
Investor demand has contributed significantly to gold's bull run this year, with net longs representing over 650 mt of gold at its height in May, and around 460 mt today -- a COMEX contract represents 100 oz of gold.
Spot gold slipped almost $10/oz overnight to around $1,240/oz Tuesday morning, having risen almost $30/oz Monday on lower interest rate expectations.
Gold jumped to two-week highs near $1,250/oz Monday after US jobs data Friday showed employment rose in May by the slowest pace since 2010, far below market expectations and reducing the chance of a rate rise in June or July.
According to CME Fed Fund Futures Tuesday, the probability of a rate rise in June is below 4% and less than 37% in July. A rate hike by the November meeting is only marginally higher than 50%, December around 75%.
"In other words, rate hike expectations are essentially back at their mid-May level before the publication of the Fed meeting minutes caused them to rise. At that time, gold was trading at $1,280 per troy ounce," Commerzbank analysts said in a note Monday.
"Against this backdrop, gold thus has further upside potential," it said.
In contrast to COMEX data, investor demand has remained robust in gold-backed exchange traded funds throughout May and into June.
The world's largest gold-backed ETF, SPDR Gold Trust, showed inflows of 12.49 mt for the week ending Friday, following a dip of 0.6 mt the previous week -- the first outflows since April.
The fund, which represents over half the total investment in gold-backed ETFs globally, has added up to 240 mt year-to-date, to over 880 mt Monday, the highest level since 2013, company data showed.
Net long positions in silver declined for the third week, down 7% to 53,916 contracts, according to CFTC data.
Platinum positions were down 22% on the week to 18,047 net long contracts, with palladium up 0.4% to 5,605 contracts.
