Funds trim gold positions on stimulus speculation

Largest Stake

Gold probably won’t see any “lasting gains” until investors stop selling ETP holdings, Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said Aug. 8. Holdings fell by 8.5 metric tons on Aug. 7, the most in a month, data compiled by Bloomberg show. A ton is valued at $43.1 million.

Slumping prices hurt producers including Melbourne-based Newcrest Mining Ltd., Australia’s largest bullion miner, which said Aug. 8 that it will write down the value of its assets by about A$6.2 billion ($5.7 billion). Billionaire John Paulson owns the largest stake in the SPDR Gold Trust, the biggest ETP. His PFR Gold Fund tumbled 23% in June, extending this year’s loss to 65%.

Futures rose 0.1% last week. The Bloomberg Dollar Index fell for six straight sessions through Aug. 9, the longest slump since April 2011. Physical demand is rebounding after gold fell below $1,300, Standard Bank Group said in a report Aug. 7. Bullion on the Shanghai Gold Exchange was about $26 more expensive than in London on Aug. 6, compared with a premium of less than $15 the previous week, the bank said.

Central Banks

Bank of Japan Governor Haruhiko Kuroda’s board said last week it will stick with an April pledge to expand the monetary base by 60 trillion yen ($622 billion) to 70 trillion yen per year. Bullion rose 70% from December 2008 to June 2011 as the Fed bought more than $2 trillion of debt.

“There’s a case to be made for gold, but it’s a volatile asset class,” said Bernie Williams, a San Antonio-based money manager at USAA Investments, which oversees over $54 billion. “Gold tends to hold up over time, it has a place in a portfolio for preservation of capital and to offset currency debasement.”

Money managers withdrew $922 million from precious-metal funds in the week ended Aug. 7, according to Adam Longenecker, the director of quantitative research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Commodity funds had outflows of $924 million, he said.

Net-long positions in crude oil dropped 2.5% to 310,827 contracts, a second straight decline, the CFTC data show. The International Energy Agency trimmed its 2014 global oil demand-growth estimate by 100,000 barrels from last month amid slowing expansion in China.

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