Hedge funds slash bullish wagers on gold before war jitters
Speculators have reduced net-long positions by 3.6%.
Gold winning streak has surprised many. (Image by Fernando Cortes| Shutterstock.com)
Gold has begun 2016 on a winning streak, hitting a seven-week high in early trading Wednesday as it builds on gains from earlier in the week, triggered mainly by escalating geo-political tensions in the Middle East and North Korea’s nuclear test.
February Comex gold was last up $10.20 at $1,088.7 an ounce. Earlier, the contract hit $1,089.20, the highest since December 4.
Positive outlooks for the metal are now popping up again. Swiss bank UBS, for one, headlined its technical outlook for 2016 as follows: “The 7-Year Cycle in Equities Is Rolling Over . . . Buy Gold!,” and it adds:
Gold has been trading in a cyclical bear market since 2011.
In 2016, we expect gold and gold mines moving into an eight-year cycle bottom as the basis for the next multi-year bull market.
Initially, we see gold profiting as a safe haven and as of 2017, gold could profit from the US dollar moving in a major top and starting a bear market.
Global research firm Capital Economics is on the same page. In its official 2016 outlook report, released Tuesday, the firm’s commodities economist, Julian Jessop, said he expects prices to hit $1,250 by the end of the year as more demand from emerging markets and building inflation concerns in developed economies provide support.
Investors seem to be following quite closely these reports, as most gold producers saw their shares soar Wednesday morning.
Barrick Gold (TSX, NYSE:ABX), the world’s largest bullion miner, was up 4.11% in Toronto to $11.14 at 10:42 am ET.
Shares in another Canadian producer, Goldcorp (TSX:G), (NYSE:GG), which is the world’s most valuable listed gold mining company, were trading 4.32% higher to $16.90 in Toronto. And Kinross Gold’s (TSX:K) stock was up 2.32% to $2.65
In New York, Newmont Mining (NYSE:NEM) was up 1.85% to $1876 and AngloGold Ashanti’s (NYSE:AU) had gained 2.17% to $7.52 by 11:00 am ET.
Still, some seem unsure of whether this gold’s mini-revival can be sustained. INTL FCStone looks for gold to fall below $1,000 an ounce during “another difficult year for the bulls” in 2016, possibly hitting $950, although the firm also sees a high above $1,200.
Citi, in turn, says it expects bullion prices to keep falling in 2016, though in a non-dramatic way: $1,030 in the first quarter, dropping over subsequent quarters to $1,000, $980 and $960.
