Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
After a strong run-up ahead of a crucial US Federal Reserve decision on interest rates on Wednesday, the gold price came crashing down again after a hawkish statement by the central bank.
On the Comex market in New York, gold futures with December delivery dates fell more than $30 an ounce from where it trading just before the announcement. In afternoon trade the sell-off accelerated with gold last exchanging hands at $1,152.30 from $1,183.50 ahead of the Fed statement.
While the Fed decided to keep interest rates unchanged it hinted at a rate rise at its next meeting in December against market expectations of a first move only in March next year. Higher interest rates boost the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing.
The Fed voted 9 to 1 to leave rates in a range of zero and 0.25% where they have been since December 2008. Interest rates in the world’s largest economy has not been raised in more than nine years.
Gold hit its highest level since June 22 a fortnight ago, amid fresh indications that a limp US economy may push a rate hike further into the future, but that narrative now seems to be in trouble.
Source: SharpsPixley
Hedge funds reduced bullish bets to more than five year lows ahead of the September Fed decision, but since then large futures speculators – referred to as “managed money” – have played catch-up with the turnaround in sentiment towards gold and the fading expectations of a rate hike in 2015.
According to the CFTC’s weekly Commitment of Traders data for the week to October 20 hedge funds added more than 47% to their long positions – bets that gold will be more expensive in the future – from the week before. Last week’s rise was 66% and hedge funds have now added net long positions for five straight weeks.
Net longs now stand at 12.2 million ounces (345 tonnes), the highest since February. At the start of the year bullish positions topped out at 16.7 million ounces when gold briefly traded north of $1,300.
Speculators also made deep cuts to short positions ahead of last week’s rally – bets that gold could be bought cheaper in the future – reducing overall positions more than 20% to 3.7 million ounces, down from record highs above 11 million ounces set in July.
In late July and early August, hedge funds entered net short positions for the first time since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.
5 Comments
george allan bloom
i wonder how many $ gold has declined in this very same situation. it still has not happened and there is no guarantee it will in december. but the commercials have unlimited sources to fat finger the market down and again screw over the speculator. im not long gold but i am long silver and i just wish they would raise already to lift the weight off the market. it is just ridiculous. are u effing kidding me , a quarter point? if this isnt manipulation i have no idea what is. put your money up and play the game. the shorts will get burned in due time.
Basel Freiherr
Hi George. The market is rigged. Advice, go long in physical gold and in physical silver. The downtrading of gold after the fed is just a signal to buy more gold. Remember, USA and Western Europe are bankrupt. The talk of ‘world’war from some german and swiss bankers is an dangerous road. Hedge and diversify.
eZeeGold
I just love these smack downs, it’s just opportunity to buy more at bargain prices.
In fact it is happening so regularly I making lots of money from short term trades, buy after the smack down and sell after a week or so. I am not leveraged so no problem comes what may.
disqussted999
“the gold price came crashing down again after a hawkish statement by the central bank”
“Hawkish”…??…what a joke!! Actually, the Fed could have said “Boo!” or just “Good afternoon,” and the already planned and prepared (yes, for you blind and braindead…collusively and criminally managed) for our viewing displeasure smashdown of the paper/electronic price of gold and silver would have commenced forthwith just as we all saw. Was the Comex spec long setup to their liking? Better believe it…it’s their modus operandi. The crime is the collusion.
The takedown had NOTHING to do with what was said, since anyone who has followed this sordidly ridiculous game of lies, spin, innuendo, deceit by the FOMC/ Fed already KNEW that’s what they would say. The message behind the meaningless words (which have been said ad nauseam for years and yet somehow magically retain their “power” despite NEVER being true) is simple:
“The Fed, The Fed, The All-Wise and Powerful Fed…Bringing to Life the Beautiful Federal Reserve Note…Destroying Gold and Silver, the Enemies of the Beautiful Wealth-Producing [for Us] Counterfeiting Machine of Our All-Wise and Powerful Fed.” Don’t believe me?…well just go look behind the fracking curtain!! …show ’em Toto….
george allan bloom
no kidding , great post. they changed like 3 words and OMG, you would have thought they raised a half percent.