HEDGE funds’ combined holdings in gold futures increased to the most bullish since January on mounting concern that conflict in the Middle East will bolster crude-oil prices, slowing economic growth and stoking inflation.
The net-long position rose 3.6% to 101,396 futures and options in the week ended September 3, US Commodity Futures Trading Commission data show. Long wagers gained 0.6% and short bets contracted 8.6%, the fourth consecutive drop and the longest retreat in a year. Combined net-long holdings across 18 US-traded commodities fell 0.3% as investors got less bullish on copper.
Gold prices that are poised for the first annual drop since 2000 rebounded 18% since reaching a 34-month low in June.
President Barack Obama, seeking congressional approval for an attack on Syria, said last week there was a "growing recognition" the world must act on allegations the government used chemical weapons against its own people. The Middle East produces 33% of the world’s oil and some investors buy bullion as a hedge against accelerating inflation.
"Whenever you have period of unrest, war, or investor fear, people go to gold," said Dan Denbow, a fund manager at the $1.2bn USAA Precious Metals and Minerals Fund in San Antonio.
"The longer-term focus that gold is not dead and there are reasons for owning it is why you’re seeing bullish bets continue to grow in the space."
Futures slipped 0.7% to $1,386.50 an ounce last week, the first drop since August 2. Thirteen analysts surveyed by Bloomberg expected prices to rise this week, with the same number bearish and five neutral. Bullion for December delivery gained 0.2% to $1,388.60 yesterday. The Standard & Poor’s GSCI spot index of 24 commodities climbed 1.1% last week, the second consecutive gain.
The MSCI all-country world index of equities rose 2.1%. The Bloomberg dollar index, a gauge against 10 major trading partners, slid 0.3%, and the Bloomberg US Treasury bond index lost 0.7%.
Gold climbed 13% since June 30, heading for the biggest quarterly advance since 2007.
The US president said he would make a more detailed case for action in Syria in an address to the nation this week after failing to gain a unified message of support following a meeting of the Group of 20 nations in Russia last week. Russian President Vladimir Putin said his country will assist Syria.
Bullish gold bets more than tripled since reaching a five-year low on June 25, CFTC data show. Speculators cut bearish wagers by 63% from a record 80,147 short contracts on July 9. Long wagers are up 13% in that time. The net-long position is 30% lower than a year earlier and tumbled 60% since reaching an historic high in August 2011. Gold is still 28% below the record $1,923.70 reached in September 2011. Eighteen analysts surveyed by Bloomberg last week said the metal would not exceed that level in the next two years and 11 predicted another high.
Prices fell 17% this year as some investors lost faith in bullion as a store of value and amid mounting speculation the US Federal Reserve will taper stimulus as economic growth accelerates.
Last week traders weighed reports showing increases for US manufacturing and services with weaker-than-forecast labour data for clues to whether Fed policy makers will begin slowing bond purchases at their meeting this month. Gold climbed 70% from December 2008 to June 2011 as the Fed pumped more than $2-trillion into the financial system by purchasing debt.
The Institute for Supply Management’s non-manufacturing index of services that make up about 90% of the US economy increased last month to the strongest since December 2005, data showed last Thursday.
US payrolls rose by 169,000 last month, trailing estimates, the labour department said the next day. Fed officials probably will go ahead with a plan to start reducing asset purchases, Bill Gross, manager of the world’s biggest bond mutual fund, said on Friday.
"People are feeling better about the future global economy, and at the same time, in part because of that, the Fed is going to start taking away the massive monetary easing," said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $340bn of assets. "Massive monetary easing and uncertainty about the future global economy had been the two pillars under the gold market."
The federal open market committee meets next Tuesday and Wednesday. Gold tumbled a record 23% last quarter as strength in the US economy raised concern that the Fed will trim its bond buying. Holdings in global exchange-traded products backed by the metal are down 26% this year. Sales of gold coins by the US Mint fell to the lowest in six years last month, retreating for the fourth consecutive month.
Gold funds had outflows of $38m in the week ended last Wednesday, according to Simon Ringrose, the MD of sales for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Money managers added $500m to commodity funds, the EPFR data show. The net-long position in crude oil declined 3.6% to 305,971 contracts, the CFTC data show. West Texas Intermediate, the benchmark US grade, advanced 2.7% to $110.53 a barrel last week, the biggest gain since early July. Prices reached a two-year high on Friday as Russia’s pledge to assist Syria raised concern that escalating tension will disrupt supplies from the Middle East.
Investors decreased bullish copper holdings by 37% to 8,211 contracts. Futures rose 0.9% in New York last week. Stockpiles tracked by the London Metal Exchange fell 9.8% since the end of June.
A measure of net-long positions across 11 agricultural products fell 1.3% to 279,134 futures and options, the first decline since August 6. The S&P GSCI agriculture index of eight commodities rose 3.4% from the three-year low reached on August 7.
Wagers on a cocoa rally climbed 2.1% to 59,464 contracts, the highest since February 2008. Prices jumped 5.3% in New York last week on dry weather in Côte d’Ivoire and Ghana, the biggest producers.
The net-long position in soybeans climbed 15% to 159,438 contracts, the highest since November. The US government may cut its outlook for the domestic crop this week after hot, dry weather, analysts surveyed by Bloomberg said. The US agriculture department updates its forecast on Thursday.
The S&P GSCI index rose 8.7% since the end of June, poised for the biggest quarterly rally in a year. Goldman Sachs Group Incorporated raised its forecast for China’s economic growth this year to 7.6% from 7.4%, citing industrial growth and global demand, in a report last week.
courtesy of Business Day BDlive
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