Hedge funds accumulated their second-biggest bet against gold on record just as prices rallied the most in 15 months on surging demand for coins and jewelry and Goldman Sachs Group Inc. ended a recommendation to sell.
The funds and other large speculators held 69,726 short contracts on April 23, within 0.6% of the all-time high reached six weeks earlier, U.S. Commodity Futures Trading Commission data show. The net-long position dropped 25% to 46,168 futures and options. Net-bullish wagers across 18 U.S.-traded raw materials slid 5%, the third decline in four weeks, with cuts in silver, corn and gasoline.
Bullion rallied 11% since reaching a two-year low April 16. The U.S. Mint ran out of its smallest gold coin last week, with sales across its products poised for the best month since December 2009, and the U.K. Mint said purchases tripled. Premiums paid by jewelers in India, the biggest importer, to secure supply surged as much as fivefold in 10 days. Goldman said April 23 it closed a bearish recommendation, while saying further declines are likely.
“It’s bizarre that the price has come back so rapidly,” said Donald Selkin, who helps manage about $3 billion of assets as the chief market strategist at National Securities Corp. in New York. “After the big decline, demand jumped like crazy. It’s the old rubber-band theory: You stretch too far, and eventually, it snaps back. Banks came in to buy, and there is record demand for coins around the world.”
Gold futures jumped 4.2% to $1,453.60 an ounce on the Comex in New York last week, the most since January 2012. Analysts are the most bullish in a month, with 15 anticipating higher prices this week. Eleven are bearish and three neutral, according to a Bloomberg survey. The contract for June delivery advanced 0.8% to $1,465.60 at 10:12 a.m. in New York.
The Standard & Poor’s GSCI Spot Index of 24 commodities climbed 2.4% last week and the MSCI All-Country World Index of equities gained 2.3%. The dollar slid 0.3% against a basket of six currencies, while Treasuries returned 0.2%, a Bank of America Corp. index shows.
Bullion tumbled into a bear market April 12 and plunged 9.3% in the next session, the biggest drop in 33 years. The retreat underscored how some investors had lost faith in the traditional store of value, even as central banks printed money on an unprecedented scale to boost growth. The slump spurred buyers across the world to increase their physical holdings, and billionaire John Paulson, the biggest investor in the largest exchange-traded product backed by bullion, reiterated his bullish view on prices.