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 another double digit jump on Monday, building on the strong end to last week’s trading ahead of a crucial decision by the US Federal Reserve 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 $1,245.20 an ounce in early afternoon trade, down from highs above $1,250 hit during lunchtime dealings.
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.
But forecasts of the Fed’s timetable and scope to scale back the program are all over the place with a Reuters poll showing only 12 out of 60 economists predict a taper this week and a small he majority believing cuts will only come in March.
CNBC quotes Mark O’Byrne, Founder and Executive Director of Dublin-based bullion dealer GoldCore as saying: “If the Fed defers a taper, we should see gold bounce from oversold levels which could help it test $1,300 again,” but on the flipside with a taper, which Goldcore does not believe will happen this week, gold “will likely fall to test strong support at $1,200”.
Others do not see much upside for the gold price. The Economic Times quotes Joni Teves, precious metals analyst at Swiss investment bank UBS, who says the resistance seen last the week “around $1,260 proved stalwart” and “suggests lingering interest to sell rallies.”
3 Comments
Ian R. Harris
This is a serious question. Based on the assumption that QE tapering will have a large effect on the stock market, why wouldn’t this be bullish for gold? It is arguable that the Gold ETF withdrawals have been the largest negative pressure on gold this year, and those withdrawals were due to a hot stock market, wouldn’t the reverse be true? To me there is a lot more money in the stock market than gold, so following the money, any exodus from gold due to the fundamental argument QE tampering is bad for gold is much small than the flight out of the stock markets and into a safe haven investment like gold, and this influx should be much larger than any potential exodus. Someone help me out here. Am I an idiot?
Otmane El Rhazi
This a good topic for this week full of risk events.
sc kane
I believe your correct, where else do you invest with falling markets when or if they do hold back the printing presses but back into gold and silver, it seems so obvious yet the think tanks are telling us gold will fall in price if tapering occurs. IMO if tapering occurs then the stock market prices will start to lose traction and turn negative. Interest rates will then rise along with inflation and the price of gold and silver as more people look for a safe haven.
Initially I think Gold and silver will fall so the big boys can load up cheap. Its all a case of timing your buy. So sell your shares when tapering begins, hold back some of your cash until the big boys have finished shorting gold and buy into the bounce.