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 futures were approaching the $1,600 an ounce level during lunchtime trade in New York on Friday, extending a rally that kicked off in the early morning hours in Europe.
Gold traders were reacting to news that the EU will create the Troubled Country Relief Program, a fund similar to the one set up in the aftermath of the US sub-prime crisis, “to break the vicious circle between banks and sovereigns,” in the words of European Council President Herman Van Rompuy.
Gold for delivery in August traded 3% or $46.60 higher by 12:30pm at $1,597.30 an ounce on the New York Mercantile Exchange after briefly scaling the $1,600 an ounce level shortly after the open. The precious metal is now trading even for 2012.
Peter Boockvar, an equity strategist at Miller Tabak told Marketwatch: “For now, party on and turn that hourglass over as more time has been bought, but only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains.”
Chuck Butlter, President of Everbank World Markets, in writing for Casey Research commented that, “the good thing about this tapping of the bailout funds is that when they shore up the banks in Spain and Italy, they won’t be adding to debt… So, does all this meet the requirements that I put on the Eurozone leaders to save the Union? No… But, at least it’s a step in the right direction”
Apart from the positive development in Europe, gold’s fundamentals are also looking brighter. Bloomberg reports the value of investors’ holding in exchange traded products backed by bullion is within sight of the all-time record set in March – 2,409 tonnes worth $124.8 billion.
According to Bloomberg, “central banks are also buying bullion, with Russia, Turkey, Ukraine and Kazakhstan expanding reserves by a combined 25 tons in May, International Monetary Fund data show. Purchases this year may exceed the 456 tons bought in 2011.”
Negatives for yellow metal remain the strengthening US dollar and sluggish buying in India as the local currency continues to weaken, putting gold out of reach of the country’s millions of small-scale jewelry traders. India’s gold demand is expected to fall by 4% in volume in 2012 according to a new Morgan Stanley survey. India imports between 800 to 1000 tonnes of gold each year.
China has taken up much of the slack on the sub-continent with physical purchases for this year forecast to be as much as 50% higher than the 380 tonnes bought in 2011.
Other precious metals shot up Friday with platinum for July delivery adding $43.40, or 3.1%, to $1,429.80 an ounce and September palladium contracts $19.10, or 3.4%, to $583.00 an ounce. Silver jumped almost 4% or more than a dollar to $27.28 in lunchtime trade.
Copper benefited most from the progress in turning around the Euro crisis. For July delivery it gained 15 cents, or 4.6%, to $3.48 per pound.
Copper is still down more than 17% over the past year. The red metal hit historic highs at the end of last July stopping just a shade under $4.50 a pound (more than $10,000 a tonne).
