Hedge funds are the least bullish on gold in more than five years as speculation about the pace of money printing by central banks whipsawed prices, driving volatility to a 17-month high.
Money managers cut their net-long position by 9 percent to 35,686 futures and options as of May 21, the lowest since July 2007, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts rose 6.7 percent to a record 79,416. Net-bullish wagers across 18 U.S.-traded commodities slid 2.1 percent, as investors became more bearish on coffee and wheat.
Gold’s 60-day historical volatility touched the highest since December 2011 last week and a gauge of price swings for the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, surged 73 percent this year. Bullion see-sawed as Federal Reserve Chairman Ben S. Bernanke testified before Congress on May 22. Two days later, Bank of Japan Governor Haruhiko Kuroda said he’s done enough to spur growth.
“Gold has so many drivers that it leads to a lot of getting pushed around by one thing or another,” said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals & Minerals Fund in San Antonio. “It makes it impossible to determine a direction.”
Futures dropped 5.4 percent in May, poised for a second monthly decline. The Standard & Poor’s GSCI Spot Index of 24 commodities fell 0.1 percent and the MSCI All-Country World of equities also declined 0.1 percent. A Bank of America Corp. Index shows Treasuries lost 1.3 percent.
Increasing price swings have made gold the fourth-most volatile commodity in the GSCI index since March 29, data compiled by Bloomberg show. Silver topped the ranking for raw materials tracked by S&P, followed by natural gas and corn. Investors sold 467 metric tons of gold through exchange-traded products this year, contributing to $45.3 billion of value being erased from global holdings, as some lost faith in the metal as a store of wealth.
Futures traded in New York rose 0.4 percent as of 6:01 a.m. after earlier slipping as much as 0.3 percent.
Gold rose as much as 2.6 percent and dropped as much as 1.8 percent on May 22, the day Bernanke told Congress that raising interest rates or curbing bond buying too soon would endanger the recovery, while also saying the bank may slow its asset purchases if there are signs of sustained economic growth. Kuroda said May 24 the Bank of Japan had announced enough monetary easing and would implement flexible money-market operations.
Volatility in gold prices will be temporary and investors will return to buy the metal as a hedge against inflation, said Nic Johnson, who helps manage $30 billion of commodity assets at Pacific Investment Management Co. in Newport Beach, California.
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