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 advanced to another record high on Wednesday after the Federal Reserve announced an aggressive interest cut of half a percentage point to stimulate the US economy.
Spot gold rose as much as 1.1% to $2,600.11 per ounce, continuing its record-setting trend over recent weeks. US gold futures also had nearly the same percentage gain.
By late afternoon, however, gold had erased those gains, with spot gold down 0.4% at $2,559.15 per ounce and futures down 0.6% at $2,582.90 per ounce.
The US central bank was widely anticipated to lower interest rates at this week’s meeting after holding them at a two-decade high for more than a year, but traders were split over how much the first cut would be.
Meanwhile, gold has hit repeated records over the past weeks as investors weighed prospects that the Fed would deploy a rate reduction bigger than a quarter percentage point, which would present a significant boost to the non-yielding bullion.
Gold, Treasuries and the S&P 500 Index have all typically risen as the Fed starts lowering rates, according to a Bloomberg News analysis of the past six easing cycles going back to 1989.
Fed’s announcement on Wednesday caps a period of flux in the gold market, as some analysts have pointed to a return to more traditional trading patterns, and in particular to gold’s longstanding tendency to rise and fall in the opposite direction to real yields.
That relationship had broken down in recent years, as gold remained historically elevated even as rates soared — with prices supported instead by huge central bank purchases, as well as surging demand from investors and consumers in Asia. Gold prices have broken out dramatically this year in particular, soaring more than 25% to successive records.
In recent months, there have been signs of Western investors jumping back into the gold market too, as bets mounted that the Fed was about to pivot. Holdings in gold-backed exchange traded funds have risen for 10 of the past 12 weeks, while long-only gold positions in Comex gold futures are hovering near the highest in four years.
(With files from Bloomberg)
