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.
The uninterrupted rise in gold ETFs has created an untested investment vehicle that could turn against the people holding it, said Kitco economist Jon Nadler in an interview with Bloomberg.
“The problem is this instrument has not experienced a sideways—let alone a downward phase—in prices after 12 years of non-stop gains,” said Nadler.
He says the the effect of ETFs has been to accelerate the price movement of gold.
Physical gold demand from jewellers used to create a brake on prices. Nadler says the high prices of gold have decimated the jewellry sector. Tonnage demand is at a 25-year low.
“I think the gold miners have created a Frankensteinian monster,” says Nadler. “I get a lot of email from jewellers, not only from India, pleading when will be able to make a living again.”
Nadler believes gold could breakdown around the $1,526 support area, which has been touched four times recently.
“If that is shattered on a closing basis for several days, I think we are looking in very short order to the mid-1400s or 1300 target.”
Nadler still recommends a 10% insurance position in gold but cautions investors not to obsess about gold performance. Rather, try to treat gold like a central bank and save it for a rainy day.
“If it doesn’t come, terrific. Enjoy the rest of your investment life.”
