Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
The gold price was battered on Friday by a quadruple shot – the end US economic stimulus, a record-setting surge in equities, further falls in the crude oil price and a rampant dollar.
In lunchtime trade on the Comex division of the New York Mercantile Exchange gold for December delivery was changing hands for $1,167.30 an ounce, down more than $30 or 2.6% on the day.
In morning trade gold gapped down over 3% from yesterday’s close to a low of $1,160.50, the lowest since July 2010. Selling was particularly heavy with more than 2.5 million ounces traded by 13:00 EST.
Bullion bank Societe Generale SA’s head of commodities research Michael Haigh said the chances are increasing that gold will drop to $1,000 an ounce according to Bloomberg.
Haigh, who correctly forecast gold’s precipitous fall in 2013, singled out the shocking decline in the price of oil to below $80 a barrel and its effect on inflation as “adding more ammunition to the downward pressure on gold.”
Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen commented that Japan’s unexpected announcement of fresh stimulus that weakened the yen and triggered some stop loss selling of gold “basically pushed gold over the edge as it triggered a major risk-on move.”
The Fed decision to end its quantitative easing and the dollar jumping to a 5-year high against a basket of currencies and particularly the yen today were “more than the market could cope with this week,” he said. The dollar and the gold price usually move in opposite directions.
Ole also says on a technical basis the support levels for gold after breaking through $1,180 – a level the metal tested twice in 2013 before recovering – now sits at $1,159 followed by $1,088
If this latter figure were reached he says it would complete a 50% retracement of the rally between 2001 and 2011. The coming week will be volatile, he says.
In September chief commodity strategist at investment bank Goldman Sachs, Jeffrey Currie reiterated the house view that the gold price is heading for $1,050 by the end of the year.
Currie argued that gold is essentially hedge against a debasement in the US dollar and rising inflation. Both these factors can no longer support the gold price.
Image by Javier Cabrio.
2 Comments
silbershark
keep calm & buy more phyzz
Rayban
Capitulation is ugly , layoffs , mine closures , etc . We may hit peak Gold next year , production output peaking & then falling due to no new mines opening & have a break even of about 1100. per oz. With real costs around 1000. for many large miners to profit . Exploration is on hold or very scaled down & probably goes lower yet . A bunch of exploration entities are gone or Zombies to the final extent . Unreliable & discredited .
Equities in Cyclicals , IPOs , Utilities , Manufacturers , Transportation , etc …. Looking volatile & a bit stressed . It is a common headline lately , enough to verify it is widespread belief . DOW , NASDAQ , S&P500 , THE NYSE , TSX , etc ALL look a bit stretched . Volatility not associated with a normal Bull Market situation . Common , raging , volatility .
We are approaching a point , the future is now . Beware , the early buy . It shall be a while & the Capitulation is one of a modern type . Capitulation shall be easy to get wrong this time . Beware the early buying when more downside is AVAILABLE .
Now if we can just get the Drunken Bears & haters off of our backs & get some physical offtake , real offtake , just a while from now . Note Russia , China & many others buying steadily .
Better than me says it is arrogant to buy all at once , buy some & wait a bit , buy some more . As well you cannot perfectly time a market , you can close though . If timing were not possible , there would be no existence of statistics , what they are for there , timing of buying & selling . There would not be Price to earnings ratio or price to Sales Ratio if timing the market was not a fact . I am buying . Different this time .