Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
On Friday the gold price made a nice move higher after disappointing economic news out of the US, but failed to retake the $1,400 an ounce level.
By early afternoon gold for delivery in December, the most active contract on the Comex in New York, was trading at $1,389 up 1% or $16 from Thursday’s close after jobs number in the US disappointed.
Precious metals investors have been worried that the US Federal Reserve will start tapering off its quantitative easing program as soon as this month which hurts the dollar and therefore increases the relative value of gold.
Chairman Ben Bernanke is eager to throttle back asset purchases under QE at the first signs of a solid economic recovery and unemployment close to 6.5% – its target rate to start dialing back its ultra-loose monetary policy.
Friday’s numbers did not support that.
The US economy added a modest 169,000 jobs in August and the unemployment rate fell to a four-and-a-half year low, but that was just because fewer people were out looking for work and therefore weren’t counted.
The reaction to the worse than expected jobs report was fairly muted and is another indication of the uncertainty in the gold market.
Despite the worries over war in Syria, which boost gold’s status as a safe haven asset, and the lacklustre US economy, trading in the metal has been largely directionless.
According to a Bloomberg survey of 31 precious metals traders, predictions whether gold will rise or fall next week is split exactly down the middle.
Gold gained 5.7% in August and briefly reach a three-month intra-day high of $1,434 at the end of that month.
Gold has also rallied sharply from the intra-day low of $1,182.60 an ounce hit on June 28 which temporarily pulled the gold market out of bear territory, but that momentum seems to have been mostly lost.
Gold has fallen back nearly 27% since it reached an all-time high above $1,900 an ounce two years ago and only 38% of gold traders believe the metal will set another record over the next 24 months.
Spot gold reached a high of $1,909 on August 23, 2011, while the most active contract, usually for delivery of the metal in three months, hit an all time peak on September 6, 2011 of $1921.
The gold price is down 16% this year and without a strong catalyst for prices to move higher is set to end its 13-year unbroken bull run.
Comments
frankinca
Agreed, this year will be the 2nd or third year that the price of gold will not will reach a new high, but the cup and saucer point has been made and the next wave is up, in fits and starts, just like the worlds economy. But, I say, remember it is the one unalterable standard for others to be measured by. The dollar has had it’s day and we must come back to the reality, ” it is paper and ink and has no lasting value for the ability to be converted to something that is material and usable”. It is a temporary method to transfer wealth and not a storage medium. Back to reality!