Gold Investors Bet on Resilient Rally as Open Interest Surges

Does Gold Have More Room to Rally?
  • ETF holdings backed by gold rise to highest since 2013
  • Net long positions in gold near highest since 2012, data show

Add a jump in open interest to signs that gold’s rally may persist after the best start to a year in a decade.

Open interest, a tally of outstanding contracts in Comex futures, rose 3.1 percent to 565,774 on Tuesday, the highest since January 2011. The same day, investors boosted holdings in exchange-traded funds backed by the metal for a sixth straight session to the highest since December 2013. The increases come after hedge funds boosted net-long positions in bullion futures and options more than five-fold since early February.

Gold futures climbed 20 percent this year in the best start since 2006, helped by speculation that the U.S. Federal Reserve will be slow to tighten monetary policy amid global risks to growth and as lending rates in the euro area and Japan fell below zero. Low borrowing costs are a boon to gold and other precious metals because they don’t offer yields or dividends.

“There’s a lot more interest in gold and we’re seeing a lot of people looking to enter gold,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “We’re seeing a lot of new buying coming in. Overall, the sentiment toward gold is extremely bullish.”

Gold for immediate delivery swung between gains and losses before slipping 1 percent to $1,273.74 an ounce at 1:57 p.m. in New York, according to Bloomberg generic pricing. Gold futures for June delivery fell 1.3 percent on the Comex.

In the U.S., where the Fed is closely monitoring the job market before deciding whether to raise rates, companies in April added fewer workers to payrolls than economists projected, according to figures Wednesday from the ADP Research Institute in Roseland, New Jersey. U.S. worker productivity decreased for a second straight quarter, government data show.

Traders see little chance of higher rates soon, even as two Fed officials said this week that an interest-rate increase should be on the table next month. Odds that the central bank will make a move at its meeting in June were at 10 percent on Wednesday, down from 24 percent at the start of last month, Fed-fund futures data compiled by Bloomberg show.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE