U.S. Data Release Aftermath: Hedge Funds Cut Bullish Gold Positions

U.S. Federal Reserve

Hedge funds slashed bullish gold bets, supplementing the most short contracts in four weeks as U.S. financial developments fueled assumptions the Feds will trim economic stimulus. Holdings across commodities have fallen the most since April.

Gold net positions fell by 13% to 87,689 futures and options contracts in the week ended Nov. 5 as the U.S. Commodity Futures Trading Commission facts and figures showed. Short bets increased 37%, the most since Oct. 15, and long positions dropped 4.9%. Holdings-combined across 18 U.S.-traded products fell by 20% to a total of 658,263 agreements. Most of the drop was from cutting cotton positions to the lowest this year and crude-oil wagers to the lowest since June.

Gold has fallen 23 % this year, heading for the biggest fall since 1981 as some investors lost belief in the yellow metal as a store of value. U.S. payrolls in October increased more than forecast to 204,000, and the finances expanded at a much quicker stride than estimated last quarter, government accounts showed last week, reviving anxiety the Fed may constrain bond buying that assisted fuel development. However, 735,000 lost their jobs for the same month according to the household survey. Barclays Plc and borrowing Suisse AG are forecasting lower commodities prices as supplies might increase.

The “U.S. finances are showing plentiful signs that it is growing, and that means the Fed will start looking at tapering either end of this year or early next,” said Dan Heckman, a Kansas City-based national consultant for U.S. Bank Wealth Management. “We are underweight on commodities as the support of stimulus will proceed away at a time when supply increase and concerns about Europe are increasing.”

Another Reason: Gold Physical Purchases

Gems & Jewellery Trade Federation in India said on Oct. 30 that gold purchases, likely will drop in this year’s festival season, and sales of coins and bars may downturn to as little as 25 % of the year-earlier total. Consumption in India, the world number one gold consumer, which trades nearly all the bullion it uses, accounted for 20% of global demand in 2012, the World Gold Council estimates.

The U.S. Mint as of Nov. 8 sold 764,500 ounces of American Eagle gold coins, against 753,000 ounces in all of 2012, according to data on the mint’s website. The mint vended 48,500 ounces in October, 77 % less than in April, when sales rushed to a historical 40-month high.

Hong Kong gold shipments to China dropped for a second month through September after the premium to take immediate delivery declined, indicating diminishing physical demand in the territory ready to become the biggest gold buyer.

Net imports, were 109.4 metric tons in September, from 110.2 tons a month previous, after deducting flows from China into Hong Kong, according to data from the Hong Kong Census and Statistics Department. While the gains have more than doubled to 826 tons in the first nine months of the year, Credit Suisse said in a note on Nov. 7 that demand from China has peaked for the year.