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.
The gold price built on overnight gains on Thursday trading up more than $25 to a day high of $1,293.80 an ounce, as traders digest a second day of Fed nominee chairperson Janet Yellen’s confirmation hearings in Washington.
Yellen today echoed Ben Bernanke’s befuddlement about the gold price saying she doesn’t “think anybody has a very good model of what makes gold prices go up or down.”
She did have some insight into gold safe haven status: “It is an asset that people want to hold when they’re very fearful about potential financial market catastrophe or economic troubles and tail risks. And when there is financial market turbulence, often we see gold prices rise as people flee into them.”
Yellen’s remarks prompted this classic tweet from investment adviser Axel Merk:
Yellen may not understand #gold, but gold understands Yellen. Gold up today.
— Axel Merk (@AxelMerk) November 14, 2013
While Yellen pleaded ignorance about where the gold price is headed, she was more confident about the state of the stock market saying traditional valuation methods do not suggest equities are behaving “bubble like”.
Yesterday in came out in support of the central bank’s stimulus program.
Yellen, a noted monetary policy dove and considered an architect of the US Federal Reserve’s quantitative easing program, in a prepared statement said “supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”
The Fed’s is looking for signs of a solid recovery in the US economy as it prepares to start winding down its QE program running at $85 billion a month and set to reach $4 trillion by the end of the year.
But Yellen’s statement seems to indicate that the economy is not there yet.
“We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession,” Yellen said adding that the jobless rate is “still too high” and the economy is performing “far short” of its potential.
Inflation remains low “and is expected to continue to do so for some time,” according to Yellen, 67, who would be the first female to lead the US Federal Reserve.
“For these reasons, the Fed is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” she said.
The money printing in the US and similar action in Japan, Europe and elsewhere following the financial crisis in 2008-2009 have been a massive boost for gold.
Gold was trading around $830 an ounce before Chairman Ben Bernanke announced Q1 in November 2008.
Comments
Wilmer
Well, once the economy completely collapses due to your never ending printing of money you’re probably going to have a better understand of why gold has ‘value’ and is significantly undervalued right now.