Hedge Funds Boost Bearish Gold Bets to Record as Rate Rise Nears

  • ETP holdings shrink to smallest since 2009 as prices slump
  • Gold futures trade near lowest since 2010 on Comex in New York

Gold Hovers at Lowest Level Since 2010

Fund managers aren’t waiting to see whether U.S. interest rates rise this month. They’ve already turned the most bearish ever on gold.

Speculators boosted their net-short positions to 14,655 contracts in gold futures and options in the week ended Nov. 24, the most since the U.S. government data begins in 2006. They’re not the only bears. Investors in exchange-traded funds backed by the metal cut their holdings for an eighth session through Monday, to the smallest since 2009. Almost $10 billion has been wiped from the value of gold ETPs this year.

Bullion has slumped about 10 percent this year, while the dollar strengthened as the U.S. economic recovery gained momentum. Tighter monetary policy reduce the appeal of the metal because it doesn’t offer investors yields or dividends, like equities or bonds. A stronger dollar diminishes the appeal of gold as an alternative asset.

“The gold story has been quite negative,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “The sentiment could certainly shift towards a more bearish side, as we get momentum trading investors piling on to the downside. It can certainly move more net short and can certainly move gold lower from these levels.”

Gold futures for February delivery fell 0.2 percent to settle at $1,063.50 an ounce at 1:48 p.m. on the Comex in New York, after touching $1,051.60 on Nov. 27, the lowest since 2010.

Goldman Sachs Group Inc. forecast gold at $1,050 in six months and $1,000 in a year as rates climb, according to a Nov. 18 report. Prices will average $995 next year amid a strong dollar and as investors seek returns in equities and bonds, Citigroup Inc. analysts including Ed Morse and Aakash Doshi wrote in a note. Renee Haugerud, founder of New York-based hedge fund Galtere Ltd., said in an interview on “Bloomberg <GO>” in November that bullion may fall to as low $900 because of the rising dollar.

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