Hedge funds and other speculators added to bullish gold bets as the metal slumped into a bear market and Goldman Sachs Group Inc. warned the retreat is accelerating after the longest rally in nine decades.
The investors increased net-long positions by 19% to 56,084 futures and options in the week ended April 9, the first gain in three weeks, U.S. Commodity Futures Trading Commission data show. That contrasts with a 7.9% decline in bullish wagers across 18 U.S.-traded raw materials, which fell to a five-week low of 431,581 contracts. Holdings in agriculture dropped to the lowest since September 2006.
The turn in the gold cycle is quickening and investors should sell the metal, Goldman Sachs said in an April 10 recommendation that returned 5.4% in three days. Gold retreated as the Standard & Poor’s GSCI Index of 24 raw materials fell to a nine-month low, extending a slump that Citigroup Inc. said marks the “death bell” for the supercycle, or longer-than-average period of rising prices. Global equities advanced to the highest since June 2008 as U.S. stocks reached a record.
“Anybody who did some buying before this big drop is probably in some pain,” said Donald Selkin, who helps manage about $3 billion of assets as chief market strategist at National Securities Corp. in New York. “The perception is that gold is not really needed as a safe haven. People are looking at the stock market and they’re stunned, and there’s no inflation. So people are saying ‘What do we need gold for?’”
Gold fell 6.2% to $1,483 an ounce last week, the biggest drop since December 2011. The S&P GSCI retreated 0.8%, reaching its lowest since July. The MSCI All-Country World Index of equities climbed 2.5% and the dollar slid 0.2% against a basket of six trading partners. Treasuries lost 0.2%, a Bank of America Corp. index shows. Gold fell as much as 3.9% to $1,425.75 an ounce, the lowest since April 2011, and was at $1,443.93 today.
A European Commission debt assessment dated April 9 said Cyprus had committed to selling around 400 million euros ($524 million) of “excess” gold reserves. The Cypriot central bank said it hadn’t discussed such plans. Cyprus has 13.9 metric tons of reserves, ranking it 61st globally with an amount equal to about 2% of daily trade in the London market.
Goldman cut its three-month target to $1,530 an ounce from $1,615 and lowered the 12-month forecast to $1,390 from $1,550, analysts Damien Courvalin and Jeffrey Currie said in a report April 10. Gold is in a “bubble,” Societe Generale SA said April 2. Assets in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached 1,158.6 tons on April 12, the lowest since late April 2010.