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 benefited from record central bank buying in the first half of the year and was supported by healthy investment markets and resilient jewelry demand, the World Gold Council’s latest Gold Demand Trends report revealed.
Gold demand (excluding OTC) dropped by 2% year-on-year (y/y) to 921 tonnes during the second quarter of 2023, although total demand (inclusive of OTC) was up 7% y/y, pointing to a solid gold market globally, the Council said.
Q2 central bank demand was down y/y to 103 tonnes, primarily driven by net sales in Turkey due to country-specific political and economic circumstances. However, this did not deter central banks from setting a new record for gold purchases during the first half of a year at 387 tonnes.
In addition, quarterly demand from central banks is in line with the longer-term positive trend – indicating that official sector buying should remain strong throughout the year, the WGC said.
Turning to gold investment, bar and coin demand increased by 6% y/y to 277 tonnes in Q2, and a total of 582 tonnes in H1, thanks to growth in key markets including the US and Turkey. Gold ETFs outflows of 21 tonnes in Q2 were notably smaller than the 47 tonnes in the same quarter of 2022, bringing net outflows to 50 tonnes in the first half of the year.
Jewelry consumption remained resilient in the face of high prices, showing a 3% y/y increase in Q2 and an H1 total of 951 tonnes. A rebound in Chinese demand and remarkably strong consumer buying in Turkey bolstered second quarter consumption, WGC data showed.
Finally, total gold supply was 7% higher y/y at 1,255 tonnes in Q2, with mine production estimated to have reached a record for H1 of 1,781 tonnes.
“Record central bank demand has dominated the gold market over the last year and, despite a slower pace in Q2, this trend underscores gold’s importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world,” said Louise Street, senior markets analyst at WGC.
“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewellery and technology demand triggered by a squeeze on consumer spending.”
The Gold Demand Trends Q2 2023 report, which includes comprehensive data provided by Metals Focus, is here.
