Hedge funds slash bullish wagers on gold over Trump election win
Hedge funds and other large speculators boosted net-long positions by 11% to 197,362 as of Nov. 12, the lowest in 14 weeks.
After falling to a session low of $1,307 shortly after the open on Thursday, the price of gold came back in late trade at just a shade under $1,325.
Earlier in the day traders made the most of gold’s recent strong to book profits on news of a drop in weekly jobless claims and a jump in manufacturing activity to an almost four-year high in the US.
Gold has been receiving a boost from some unfamiliar quarters recently.
Noted investor and a closely followed newsletter writer for the past 20 years, Dennis Gartman told Hard Assets Investor he does not consider himself a gold bug, but that he has “quietly turned bullish on gold for a few reasons:
Firstly, beginning five and six weeks ago we started to see a lot of the mining companies— even the largest gold mining companies— begin to curtail production. That’s always a sign of an end of a bear market.
When senior management at the largest gold mining firms throw their hands up in dismay and begin curtailing production, usually within weeks the lows are going to be found. Decision by committee is always that way. It’s slow; it takes time; and it’s always late.
Two, I don’t see any major reduction in accommodation that the Fed is pushing into the system. We are far from tightening; we are still aggressively easing, with $65 billion still going into the system between each FOMC meeting. Yes, that’s down from $85 billion, but still, those are massive injections of reserves into the system. The Bank of Japan is doing even more than the Fed.
Thirdly, supplies are tight. The fact that gold futures moved to a very modest backwardation indicates how tight deliverable supplies of gold are. And finally, when you go and speak at “gold bug” conferences, the populations are down by 40%. That tells you something. Throw all those things into the pot, stir them around a little bit, and it tells me it’s time to be bullish.
Gold prices have gone down, and the market has beaten prices up about as much as they can. Bad news came out several times; you’ve had gold being downgraded by multiple brokerage firms, and it didn’t break.
On Thursday Edel Tully, precious metals strategist at Swiss investment and London bullion bank UBS, said she is moving from “outright bearish” to “neutral/slightly positive” and upping the bank’s forecast of the average 2014 price by a full $100 an ounce.
After a dismal 2013 that saw gold lose 28% in value and suffer the worst price performance in 32 years, the yellow metal has surprised a few pundits, gaining 9.6% year to date.
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