Hedge funds increased bets on gold rallying after prices plunged the most in 33 years, underscoring billionaire John Paulson’s view that bullion will rebound.
Fund managers and other speculators increased net-long positions in gold by 9.8% to 61,579 futures and options in the week ended April 16, U.S. Commodity Futures Trading Commission data show. Investors turned bullish on silver for the first time in three weeks. Wagers on higher prices across 18 U.S.-traded raw materials climbed 5.1% to 453,467 contracts, the first gain in three weeks.
A two-day, 13% drop in gold through April 16 drove prices to a two-year low, erasing $560 billion from the value of central-bank reserves since the metal peaked in 2011. Official- sector purchases and demand in Asia will support bullion, Paulson & Co. said in a letter to clients last week, joining BlackRock Inc., the world’s biggest money manager, in predicting a rebound. The U.S. Mint’s sales of American Eagle gold coins surged eightfold this month from a year earlier.
“Given the price action, this rise in holdings was pretty surprising,” said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals & Minerals Fund in San Antonio. “People may have been looking to get back into the market and are taking advantage of the price to do so. There are people who still have a long-term belief in it. Physical buyers have also stepped up.”
Gold futures slumped 7% to $1,395.60 an ounce on the Comex in New York last week, the biggest drop since September 2011. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 2.5%. The MSCI All-Country World Index of equities slid 2.2% and the dollar rose 0.5% against a basket of six trading partners. Treasuries rose 0.1%, a Bank of America Corp. index shows. Gold futures for June delivery gained 1.9% to $1,422.20 at 10:05 a.m. on the Comex in New York.
Since reaching $1,321.50 on April 16, the lowest since January 2011, bullion rebounded 7.6%. The China Gold Association said retail sales surged April 15 and 16. Imports by India may jump by 36% in the three months through June compared with a year earlier, the Bombay Bullion Association Ltd. said April 18. The U.S. Mint sold 167,500 ounces so far in April, heading for the biggest monthly total since May 2010.