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 nice run at the beginning of the new trading year, on Monday in New York gold futures with February delivery dates retreated to below $1,100 an ounce as worries about the global economy and geopolitics overwhelmed financial and commodity markets.
Last week the metal reached a two-month high on the back of safe-haven buying, but with a fresh plunge in oil and copper prices and continuing weakness on global stock markets, bulls were in retreat everywhere.
With lots of money still sloshing around in the system but most investors gripped by fear, The World Gold Council’s investment outlook for 2016 released last week, may find more eager readers this year than would otherwise be the case.
The WGC, an industry grouping and research body, points to one factor that is increasing investors fearfulness about the outlook: “The interconnectedness of global financial markets has resulted in a higher frequency and larger magnitude of systemic risks.”
What makes gold valuable in these situations is the metal’s low correlation to other assets, in contrast to equities which generally increase their correlation to risk assets during periods of contraction:
The current down leg in the gold price could be entering its final months if history is a guide:
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