Traders are divided in their outlook for prices, with 15 analysts surveyed by Bloomberg expecting the metal to rise this week. Thirteen were bearish, and five neutral. Investors cut their short holdings by 10% to 71,311 contracts, the biggest drop since March 19.
Short wagers may keep declining after prices rallied 2.3% in the two days after the cut-off date for the CFTC data. A drop in contracts outstanding on the Comex also “likely reflects bouts of short covering,” Edel Tully and Joni Teves of UBS AG said in a report. Gold open interest dropped more than 8% last month, bourse data through May 30 show.
Holdings in exchange-traded products backed by gold retreated for a fifth month in May, dropping 5.6% to 2,148 tons, the lowest since May 2011. The value of the assets tumbled $44.2 billion this year as some investors lost faith in the metal as a store of value. Billionaire George Soros joined funds managed by Northern Trust Corp. and BlackRock Inc. in cutting holdings of ETPs in the first quarter, filings with the Securities & Exchange Commission show.
“Physical demand for gold has been good, but it hasn’t been enough to offset the losses coming out of ETFs,” said Timothy Hoyle, the director of research at Radnor, Pennsylvania- based Haverford Investments, which oversees about $6 billion of assets. “Gold has been in a decade-long bull market, and I could see gold continue to tread water for a while now or even trade down. Things really need to go wrong in the economy for gold to go up.”
Investors pulled $1.03 billion from gold funds in the week ended May 29, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Total outflows from commodity funds were $1.24 billion, according to EPFR.
Wagers on a rally in crude oil dropped 6.2% to 217,531 contracts, the first decline since April 23, the CFTC data show. Platinum holdings fell for a second week to 18,873 contracts, the lowest since August. Bets on higher cotton prices tumbled 21%, the most since investors were net short in November.
The funds trimmed their net-short position in copper to 8,872 contracts from 9,033 a week earlier. Speculators have been betting on a decline since the end of February. Prices in New York dropped 8.8% this year on signs that supplies will exceed demand. The International Monetary Fund on May 29 cut its forecast for expansion this year and next in China, the world’s biggest consumer of commodities from cotton to soybeans to zinc.
A measure of net-long positions across 11 agricultural products gained 28% to 293,716 contracts, paring this year’s drop to 27%. The S&P Agriculture Index of eight commodities declined 4.5% since the start of January.
“As long as the economic growth picture in China and Europe remains in question, we think there’s not a compelling case for commodities,” said Jim Russell, a senior equity strategist in Cincinnati at U.S. Bank Wealth Management, which oversees about $110 billion in assets. “We view it as a macro- economic supply-demand type dynamic, and right now it feels like the demand is maybe slipping away a little.”