Gold is precious again. After investors sent bullion tumbling in 2013 by the most in three decades and kept dumping the metal earlier this year, demand is now up and prices are defying bearish forecasts. Money managers increased net-long positions for a fourth straight week through July 1 and holdings in exchange-traded products are climbing at the fastest pace since 2012.
“Gold’s performance has proven the bears wrong so far this year,” John Kinsey, who helps manage about C$1 billion ($935 million) at Caldwell Securities Ltd. in Toronto, said in a telephone interview yesterday. “We look for further strength through the balance of the year.”
While the latest government data point to an improved U.S. economy and Goldman Sachs Group Inc. and Societe Generale SA predict prices will retreat by year-end, inflation concerns and pockets of unrest are sending investors into gold as a haven. Prices extended gains after the Federal Reserve signaled earlier this month that it will keep interest rates near record lows and violence spread in Iraq and Ukraine.
The bulls are being rewarded. The value of the gold funds rose by $4.6 billion this year as prices rallied 9.5 percent. The metal has rebounded from last year’s 28 percent plunge that was triggered by muted inflation and as investors shunned the metal in favor of equities.
Futures slid 0.1 percent to $1,316.20 an ounce on the Comex in New York at 12:35 p.m., after five straight weekly gains, the longest streak since January. The Bloomberg Commodity Index of 22 raw materials climbed 5.2 percent in 2014, while the MSCI All-Country World Index of equities rose 4.9 percent. The Bloomberg Treasury Bond Index gained 2.8 percent.
Gold Wagers
The net-long position in gold rose 20 percent to 136,929 futures and options contracts in the week to July 1, according to U.S. Commodity Futures Trading Commission data published last week. That’s the highest since March 18 and up fourfold since the start of the year. Short holdings betting on a drop retreated 29 percent, a fourth straight decline.
Assets in bullion-backed global ETPs increased by 12.6 metric tons last week, the most since November 2012. Holdings are rebounding after six straight quarterly declines that began before gold entered a bear market in April 2013.
The U.S. central bank has kept its benchmark lending rate near zero percent since December 2008, even as it trimmed its monthly bond-buying program to $35 billion, after five straight cuts of $10 billion each since November. There is no need to change current monetary policy, Fed Chair Janet Yellen said July 2. Bullion jumped 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs at an all-time low.
For the rest of this article, click here: http://www.bloomberg.com/news/2014-07-07/gold-shines-again-as-hedge-funds-increase-holdings-commodities.html