Managed funds boost bullish positions on stimulus outlook

June 18 (Bloomberg) -- Managed funds added to their bullish commodity positions as mounting speculation that central banks will announce more economic stimulus halted a slide in prices and drove gold to its longest rally since August.

Money managers raised combined net-long positions across 18 U.S. futures and options by 9.1 percent to 587,327 contracts in the week ended June 12, rebounding from the lowest level this year, Commodity Futures Trading Commission data show. Gold holdings rose to a six-week high, while wagers on a rally in silver prices jumped to the highest since the start of May.

More than $1.5 trillion was added to the value of global equity markets in the past two weeks on speculation the Federal Reserve will join central banks in bolstering growth at its policy meeting this week. Commodities rose more than 80 percent from December 2008 to June 2011 as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing and held borrowing costs at a record low. Policymakers from the U.K. to Japan are warning of the threat posed to markets by Europe’s debt crisis.

“The markets are signaling they expect some kind of central monetary easing,” said Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.7 billion of assets. “That tends to bode well for the type of assets that get re-priced very quickly when that happens, and that’s the commodity complex.”

GSCI Rally

The Standard & Poor’s GSCI Spot Index of 24 commodities fell for five sessions through June 13, before rallying 1 percent the next two days to pare last week’s drop to 0.9 percent. The MSCI All-Country World Index of equities last week rose 1.7 percent. The U.S. Dollar Index, a measure against six trading partners, slipped 1.1 percent last week. Treasuries returned 0.3 percent, a Bank of America Corp. index shows.

The GSCI gauge slid 1 percent to 576.73 at 9:03 a.m. in New York today.

The Fed’s Open Market Committee, which sets the course of policy, begins a two-day meeting June 19. Fed officials, including Vice Chairman Janet Yellen, have said there’s scope for further easing at some point to reduce a jobless rate persisting above 8 percent.

Goldman Sachs Group Inc. predicted a 29 percent return over the next year from S&P’s GSCI Enhanced Commodity Index, saying that Europe’s policy makers will contain the debt crisis and that the recovery in the U.S. and China will continue. Price risks are “shifting more to the upside,” Jeffrey Currie, the bank’s head of commodities research in New York, said in the report on June 11.

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