Hedge fund gold positions climb to highest since January

Hedge funds’ combined holdings in gold futures (COMEX:GCZ13) increased to the most bullish since January on mounting concern that conflict in the Middle East will boost crude-oil prices (NYMEX:CLV13), slowing economic growth and stoking inflation.

The net-long position rose 3.6% to 101,396 futures and options in the week ended Sept. 3, U.S. Commodity Futures Trading Commission data show. Long wagers gained 0.6% and short bets contracted 8.6%, the fourth consecutive drop and the longest retreat in a year. Combined net-long holdings across 18 U.S.-traded commodities fell 0.3% as investors got less bullish on copper.

Gold prices that are poised for the first annual drop since 2000 rebounded 18% since reaching a 34-month low in June. President Barack Obama, seeking Congressional approval for an attack on Syria, said Sept. 6 there is a “growing recognition” the world must act on allegations the government used chemical weapons against its own people. The Middle East produces 33% of the world’s oil and some investors buy bullion as a hedge against accelerating inflation.

“Whenever you have period of unrest, war, or investor fear, people go to gold,” said Dan Denbow, a fund manager at the $1.2 billion USAA Precious Metals & Minerals Fund in San Antonio. “The longer-term focus that gold is not dead and there are reasons for owning it is why you’re seeing bullish bets continue to grow in the space.”

Traders Split

Futures slipped 0.7% to $1,386.50 an ounce last week, the first drop since Aug. 2. Thirteen analysts surveyed by Bloomberg expected prices to rise this week, with the same number bearish and five neutral. Bullion for December delivery was little changed at $1,385.90 today.

The Standard & Poor’s GSCI Spot Index of 24 commodities climbed 1.1% last week, the second consecutive gain. The MSCI All-Country World Index of equities rose 2.1%. The Bloomberg Dollar Index, a gauge against 10 major trading partners, slid 0.3%, and the Bloomberg U.S. Treasury Bond Index lost 0.7%.

Gold climbed 13% since the end of June, heading for the biggest quarterly advance since 2007. Obama said he’ll make a more detailed case for action in Syria in an address to the nation this week after failing to gain a unified message of support following a meeting of the Group of 20 nations in Russia last week. Russian President Vladimir Putin said his country will assist Syria.

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