Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
Gold is looking vulnerable ahead of Friday’s US job numbers
On Tuesday on the Comex market in New York, gold futures with December delivery dates fell for a fifth session in a row giving up more than $20 an ounce to trade at a one month low.
Settling at $1,114.10, gold is down nearly $70 an ounce or 6% from where it trading just before the Federal Reserve’s interest rate announcement last week which opened the door for a rate rise when the bank next meets in December.
Higher interest rates boost the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing and Friday’s employment figures in the US will give the clearest indication whether the Fed lift rates from near zero where they have been since December 2008.
Large futures speculators or “managed money” investors such as hedge funds have built up huge long positions – contracts that place bets gold will be more expensive in future – since September.
Weakness since the Fed’s hawkish tone of last week can be ascribed to hedge funds reducing these positions. Should a positive jobs number increase the likelihood of a rates rise – something gold bulls haven’t had to contend with since June 2006 – hedge funds have 15.2 million ounces or 430 tonnes worth of gold looking for buyers according to the CFTC’s weekly Commitment of Traders data.
At the same time short positions have also been cut dramatically to just 3.1 million ounces creating a huge overhang in the market.
Current positioning also constitutes a huge reversal from July and early August when 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.
8 Comments
Swiss Freiherr
Paper gold = not gold
arabianmoney
How can the Fed possibly raise rates when the ECB, BOJ and PBOC are cycling as fast as possible in the opposite direction? Why are S&P 500 profits and revenues down for two quarters in a row if the US economy is expanding? How can it be????
Farah Bazzrea
Sounds like “smart money” is long gold. Speculation on whether hedge funds will buy, hold or sell as a result of the FED’s bogus labor numbers is a 33.3% game. Imho, better odds by following the money.
Larry
Bitcoms have just appreciated. Must be because gold ETF’s just dropped. Both are leveraged manufactured bubbles created by fleeing capital & have nothing in common with bullion. Once this bubble pops we shall be left with real bullion and a worthless $US. Notice the world banks, especially China increasing their bullion reserves? The fix is on. Don’t be left without any.
Russ Winter
Managed money was net long 11.4 million ounces on Oct.27 when was POG at 1167. The liquidation run rate is a SWAG but I have been using 10,000 net for each $10 move. As of Tuesday we have fallen $50 since the Oct. 27 CoT. That’s 5 million oz that may have already been liquidated. A case can be made that specs have already been in a liquidation well before the jobs report.
http://winteractionables.com/?p=26749
rayban
FED can make moves ….. Gold follows futures very slowly to react ………. How much risk leverage is there in Gold , anytime soon , ie can be leveraged from cheap money much less , from fundamentals much more ?
dassa0069
How could the job numbers be decent when year on year holiday sales have fallen off a cliff?
dassa0069
Comex has plenty of paper but a dirth of physical god.