The number of hedge funds investing in bullion dropped to the lowest since 2010 and assets slumped 31% this year to $22.2 billion on losses and redemptions, according to Farhan Mumtaz, an analyst at EurekaHedge Pte Ltd., the Singapore-based fund-research company. Taurus Funds Management Pty Ltd. shut its precious-metals fund because of investor redemptions after prices fell, Gordon Galt, a principal at the Sydney-based fund manager, said June 5. Withdrawals from global gold ETPs helped erase $46.7 billion from the value of the assets in 2013, wiping out the gains of the previous two years.
Last month’s gains in employment may not be sufficient proof of improvement for Fed policy makers, who have pledged to hold the benchmark interest rate near zero as long as unemployment remains above 6.5% and the outlook for inflation doesn’t exceed 2.5%. The jobless rate was 7.6% in May.
Fed Chairman Ben S. Bernanke needs to see four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases, according to Vincent Reinhart, a former director of the Fed’s Division of Monetary Affairs. Bill Gross, manager of the world’s biggest bond fund, said June 7 the central bank is unlikely to reduce its asset purchases. Bullion surged 56% since the end of 2008 as central banks printed money on an unprecedented scale to boost growth.
Gold traders are the most bullish since before the bear market began two months ago with 19 analysts surveyed by Bloomberg expecting prices to rise this week. Eight were bearish and six neutral. That’s the largest proportion of bulls since March 22. This year’s price slump has spurred a surge in demand for coins and jewelry, with the U.S. Mint saying June 5 that its sales may be a record this year.