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 enjoyed a nice bounce of nearly $13 or 1% an ounce on Friday ahead of a decision by the US Federal Reserve next week on winding down its US monetary stimulus program.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at $1,237.70 an ounce at the close, up $12.80 from yesterday in light Friday trade.
The Federal Open Market Committee could announce a reduction in purchases under its quantitative easing program that has pumped $4 trillion of easy money into the US economy at its two-day meeting ending on Wednesday.
The Fed has been reviewing QE and is eager to throttle back asset purchases running at $85 billion a month at the first signs of a solid economic recovery in the US; something the data have been supporting recently.
Most observers believe the impact on the gold market of the eventual QE taper announcement would be minimal unless the cuts are much more than anticipated or it hints at a radically different direction for monetary policy, something that is unlikely so near a change of leadership at the central bank.
The dreaded taper has been signposted for months and should now be baked into the gold price.
More damaging to the gold price than a Fed move is the continued dumping of gold-backed ETFs by hedge funds and big money managers.
While physical demand for the metal from Asia is growing the volumes being liquidated in the West have become overwhelming.
The holdings of the world’s largest gold ETF, SPDR Gold Shares (NYSE: GLD) has dropped some 15 tonnes so far this month, falling to the lowest level since January 2009.
GLD has experienced year-to-date outflows of 526 tonnes to 827.6 tonnes, down more than 38% from the start of the year.
2 Comments
Hussein
Most observers believe the impact on the gold market of the eventual QE taper announcement would be minimal unless the cuts are much more than anticipated or it hints at a radically different direction for monetary policy, something that is unlikely so near a change of leadership at the central bank.
Since the cuts are not much more than anticipated what minimal effect we can see on future GOLD price? It would nice if some add comments how minimal effect estimating it might appears?
elaine s
Per the money flows out of the bond markets these past 2 weeks, won’t there be more money to flow into precious metals and the equity markets?