Source from (Gulf Times): http://www.gulf-times.com/business/191/details/353154/hedge-funds-selling-gold-after-propping-market-a-month-ago
Published: May 19, 2013
Just a month ago, CFTC data showed hedge funds
had added to their net long positions in US gold futures despite a
record loss in bullion prices at that time due to a broad commodities
selloff triggered by global economic worries.
The spot price of gold fell to below $1,340 an
ounce in mid-April, losing over 8% or more than $125 in a single day.
The selloff was mitigated by buying support later in the week from
consumers attracted to the drop in prices for gold bars, coins, nuggets
and jewellery. Gold futures then shot back up, to above $1,400.
Since then, they’ve fallen again, closing on Friday at below $1,365 an ounce.
“I think hedge funds have begun accepting the
fact that deflation is a bigger threat to the US economy now than
inflation. So, the argument of owning gold as an inflation hedge no
longer holds water,” said Adam Sarhan, chief executive at New York-based
investment advisory Sarhan Capital.
Open interest, a measure of market liquidity,
fell more than 3% in the week to May 14 for gold contracts traded by
money managers on the Comex division of the New York Mercantile
Exchange, the CFTC data showed.
In terms of actual contracts, the net long
position held by money managers fell 10,043 to 39,216. Based on Comex
closing prices for May 14, Reuters calculations showed a net outflow of
about $1.4bn from the drop.
In mid-April, after hedge funds had rushed in to
buy gold, open interest for the precious metal on Comex jumped by a
staggering 24%.
On Friday, gold fell for a seventh straight
session, its longest losing streak in four years, as the dollar rose to
the highest since 2008 after some Federal Reserve officials said the
central bank should end its stimulus for the US economy.
Ultra low interest rates and hundreds ofbns of
dollars of Fed stimulus money have fueled higher prices for gold and
other commodities over the past 3 years.
This year, gold’s safe-haven lure been dulled
by improving US economic data, which included a May reading for consumer
sentiment that stood at a near six-year high. Money has also been
rotating out of gold into equity markets as US stock prices hit record
highs.
Exchange-traded products in gold - investment
vehicles that give investors exposure to bullion through issuing
securities backed by the physical metal - have seen huge outflows this
year.
Reuters/New York
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