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.
Gold was coming under renewed pressure in Asian trading on Thursday with the strong dollar and an imminent interest rate rise in the US taking most of the blame.
Gold for delivery in February, the most active contract on the Comex market in New York, hit a low of $1,163.80 an ounce, levels not seen since the beginning of February this year.
With an 8% fall, November was the worst month for the metal since June 2013. Gold has now trimmed its year to date gains to 9.8%.
The greenback’s all-time peak of 164 was reached in February 1985. That coincided with a bottom in the price of gold of $284 an ounce
Higher interest rates boosts the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing. Fed funds futures, a measure of expectations for Federal Reserve rate movements, are now pricing in a 100% chance of a hike when the central bank meets in two weeks’ time.
The dollar measured against a basket of the currencies of major US trading partners has surged since Donald Trump’s victory in the US presidential elections hitting 14-year highs above 100 this week.
The greenback’s all-time peak of 164.7 was reached in February 1985. That coincided with a bottom in the price of gold of $284.25 an ounce.
“From an investor point of view there is little reason to hold gold,” Georgette Boele, a currency and commodity strategist at ABN Amro told Bloomberg yesterday:
“Rising inflation expectations are more than countered by the rise in U.S. Treasury yields and expectations about upcoming rate hikes by the Fed. As long as real yields rise and there are no major inflation fears, prices will go lower.”
The Dutch bank now predicts gold to slide to $1,100 an ounce by the end of next year.
