Hedge funds cut wagers on a gold rally for the first time in three weeks on mounting speculation central banks will curb record stimulus and as this year’s slump in bullion spurred losses for billionaire John Paulson.
The funds and other large speculators lowered their net-long position by 4.1% to 54,779 futures and options by June 11, U.S. Commodity Futures Trading Commission data show. Net-bullish wagers across 18 U.S.-traded commodities rose 0.1%. Bearish copper bets more than doubled as the metal had its longest slump since November. Cocoa holdings advanced to the highest since 2008 before the biggest weekly slide since January.
The Bank of Japan left a lending program unchanged on June 11 and refrained from expanding its toolkit for tackling volatility in bonds. Federal Reserve policy makers meeting this week may discuss slowing $85 billion of monthly debt purchases amid signs of a sustained economic recovery. Gold surged 70% as the Fed bought $2.3 trillion of debt from December 2008 through June 2011. Paulson’s Gold Fund tumbled 13% in May, extending this year’s loss to 54%.
“There’s definitely a concern that if the Fed starts to remove the monthly purchases, that’s certainly signaling a strengthening in conditions, and that puts a bid into the dollar and certainly at the margin hurts gold,” said Ted Harper, a fund manager at Frost Investment Advisors LLC in Houston, who helps manage more than $9 billion of assets. Paulson’s “returns are emblematic of the difficult environment that gold investors have been facing,” he said.
Gold futures tumbled into a bear market in April and are now down 17% since the start of the year at $1,384.70 an ounce, heading for the first annual decline since 2000. Bullish bets slumped 78% from a record in August 2011 and the metal is 28% below its all-time high of $1,923.70 reached in September 2011. Prices advanced 0.3% last week.
The Standard & Poor’s GSCI Spot Index of 24 commodities rose less than 0.1% last week, while the UBS Bloomberg CMCI gauge of 27 raw materials lost 0.8%. The MSCI All- Country World Index of equities fell 0.7% and the dollar was down 1.2% against six major trading partners. A Bank of America Corp. index shows Treasuries returned 0.3%.