Hedge Funds’ Big Short Could Be Fool’s Gold – by David Fickling (Bloomberg News – ‎July‎ ‎30‎, ‎2018‎)


Investors haven’t been this bearish for years. Are they wrong?

Investors have never been so down on gold. Managed money funds’ position in Comex gold futures and options last week crashed to a net short of 27,156 contracts.

That amount — equivalent to 2.7 million troy ounces, or 14 million-odd wedding bands — represents the most bearish position for hedge fund investors in data going back to 2006, outstripping even the major wobble at the end of 2015 as the U.S. Federal Reserve started edging away from its zero-interest-rate policy.

The reason for the attack of nerves isn’t hard to discern. The dollar has been rising so much of late that even President Donald Trump, an avowed if seemingly inconsistent fan of a strong greenback, has been fretting that it’s hitting the competitiveness of U.S. exports.

Gold tends to rise when the dollar falls and vice versa, so it stands to reason that with the U.S. economy growing at 4.1 percent while the fed funds rate marches north of 2 percent, the dollar should be heading up and gold down.

Even some of the market’s favorite gold puts are out of the money. Indian jewelry consumers can often be expected to buy into patches of weakness, but because of the rupee’s 7.4 percent decline against the greenback this year they’re not seeing much weakness.

For the rest of this article: https://www.bloomberg.com/view/articles/2018-07-30/hedge-funds-big-short-could-be-fool-s-gold

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