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Speculators Lower Gold Bull Wagers on U.S. Rate Outlook By Marvin G. Perez Aug 25, 2014 6:00 AM GMT+1000
Investors are exiting the gold market on speculation that signs of sustained U.S. economic growth will push the Federal Reserve closer to raising interest rates, cutting demand for bullion as an inflation hedge. Hedge funds reduced their bullish gold bets for the third time in four weeks, and open interest in New York futures and options are near the lowest in five years, U.S. government data show. Prices tumbled 2 percent last week, the most since late May, erasing $1.2 billion from the value of exchange-traded products backed by bullion. Gold has dropped 4.9 percent from 16-week high in mid-July on gains for U.S. housing and manufacturing. Federal Reserve Chair Janet Yellen said Aug. 22 that if economic progress “continues to be more rapid than anticipated,” an interest-rate increase could come sooner than currently expected. Bullion tumbled 28 percent last year as the central bank started reducing bond buying. “Gold bugs are on the run, and we believe that prices will continue a long-term downward trend,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said Aug. 21. “In quiet times, when the pendulum seems to be improving, or the global economy improves and news flow is bright, gold loses its bid immediately.” Futures dropped 6.6 percent in the past 12 months to $1,280.20 an ounce in New York. The Bloomberg Commodity Index of 22 raw materials fell 2.8 percent, while the MSCI All-Country World Index of equitiesclimbed 16 percent. Long Wagers
The net-long position in gold declined 13 percent to 116,916 futures and options contracts, U.S. Commodity Futures Trading Commission data show. Short holdings betting on a drop jumped 17 percent to 24,442, while long wagers retreated 8.5 percent to 141,358, the biggest drop since March.
