Hedge-fund managers are making the biggest ever bet against gold as billionaire George Soros sold holdings last quarter and Goldman Sachs Group Inc. predicted more declines after the longest slump in four years.
The funds and other large speculators held 74,432 so-called short contracts on May 14, U.S. Commodity Futures Trading Commission data show. That’s the highest since the data begins in June 2006 and compares with 67,374 a week earlier. The net- long position dropped 20% to 39,216 futures and options, the lowest since July 2007. Net-bullish wagers across 18 U.S.- traded raw materials rose 1.1% to 588,482, led by gains in hogs, corn and cotton.
Gold prices that surged sixfold in the past 12 years fell 19% in 2013, including an eight-session slump through today in the longest since March 2009. Soros joined funds managed by Northern Trust Corp. and BlackRock Inc. in cutting holdings of exchange-traded products in the first quarter. ETP assets are now at the lowest since July 2011 after some investors lost faith in gold as a store of value amid improving economic growth, low inflation and a rally in equities.
“Gold has faced disappointment after disappointment,” said John Stephenson, a senior vice president and fund manager who helps oversee about C$2.7 billion ($2.65 billion) at First Asset Investment Management Inc. in Toronto. “It’s had a 12- year run, but the whole fear-mongering that the world is going to end is just not working. So, I think that any last vestige of an investment thesis for gold has been stripped.”
Gold futures fell 5% to $1,364.70 an ounce on Comex in New York last week. Prices slumped as Federal Reserve regional bank presidents including Richard Fisher of Dallas and Charles Plosser of Philadelphia called for a reduction of U.S. monetary stimulus. Fisher and Plosser don’t hold a policy vote this year. Seventeen analysts surveyed by Bloomberg expect bullion to fall this week, with eight bullish and three neutral.
The Standard & Poor’s GSCI Spot Index of 24 commodities climbed 0.4% last week, and the MSCI All-Country World of equities gained 1%. The dollar rallied 1.3 against a basket of six major currencies. A Bank of America Corp. Index shows Treasuries lost 0.2%.
Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest bullion ETP, by 12% to 530,900 shares as of March 31, compared with three months earlier, a Securities and Exchange Commission filing showed May 15. The reduction followed a 55% cut in the fourth quarter last year. Paulson & Co., the top investor in the SPDR fund, maintained a stake of 21.8 million shares, now valued at $2.86 billion. Global ETP holdings slid 16% to 2,198.3 metric tons this year, valued at $95.7 billion.