Hedge funds cut bullish gold bets by the most since June amid speculation about whether the Federal Reserve will begin trimming its monthly bond purchases.
Money managers cut their net-long position by 27% to 48,103 futures and options by Aug. 6, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts rose 26%. Net-bullish bets across 18 U.S.-traded raw materials dropped 19% to the lowest since March and a measure of wagers across agricultural commodities turned negative for the first time on record.
Gold fell into a bear market in April as some investors lost faith in the metal as a store of value and inflation failed to accelerate amid unprecedented money printing by central banks. Charles Evans, Sandra Pianalto and Richard Fisher, regional Fed presidents in Chicago, Cleveland and Dallas, said last week that policy makers may be closer to tapering debt buying as the labor market recovers. U.S. jobless claims fell in the four weeks ended Aug. 3 to the lowest since November 2007.
“We expect the global inflationary environment to remain subdued, so we would not rush into buying gold,” said Jim Russell, a Cincinnati-based senior equity strategist who helps oversee about $110 billion of assets at U.S. Bank’s wealth management group. “Inflation has not played out as anticipated, and we don’t think it’s going to.”
Gold futures tumbled 20% to $1,339.60 an ounce since the start of January, heading for the first annual loss in 13 years. Fourteen analysts surveyed by Bloomberg expect the metal to fall this week, with a further nine bullish and seven neutral. That’s the largest proportion of bears since June 21.
The Standard & Poor’s GSCI Spot Index of 24 commodities lost 1.9% this year. The MSCI All-Country World Index of equities rose 11%. The Bloomberg Dollar Index, a gauge against 10 major trading partners, gained 3.4% and the Bloomberg U.S. Treasury Bond Index dropped 2.5%.
The Fed’s Evans, among the most vocal proponents of record monetary stimulus, said Aug. 6 that the labor market showed “good improvement,” and he indicated a cut in debt purchases may begin in September. Holdings in global exchange-traded products backed by gold dropped 26% this year to the lowest since May 2010, erasing $57.8 billion of value.