Gold Open Interest Rises to Five-Year High as Bullish Bets Soarby
Market already ‘crowded’ with bullish traders: Optionsellers
Money managers boosted net-long gold positions to record
Gold holdings rose to the most in more than five years as investors pile into the metal amid turmoil in financial markets and concern over global economic growth.
Open interest, a tally of outstanding contracts in gold futures on the Comex in New York, climbed to the highest on Friday since November 2010. In the week ended June 28, money managers boosted their net-long positions on the precious metal to the highest since data begins in 2006, U.S. Commodity Futures Trading Commission data show.
Gold has rallied 28 percent this year on growing speculation that borrowing costs in the U.S. will remain low for longer, a boon to precious metals, which don’t pay interest. The U.K.’s vote to exit the European Union added to global growth concern, spurring volatility in financial markets and boosting demand for haven assets. Spot gold swung between gains and losses Tuesday after four straight increases.
“We’re consolidating some of the gains that we’ve seen recently,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “We’re trading at fair value.”
Bullion for immediate delivery gained 0.4 percent to $1,355.92 an ounce at 2:13 pm. in New York, after declining as much as 0.9 percent earlier. Gold futures for August delivery gained 1.5 percent to settle at $1,358.70 an ounce on the Comex. Futures trading was shut on Monday as the U.S. celebrated Independence Day.
Traders see less-than 50 percent odds that policy makers will raise U.S. rates by December 2017, based on Fed funds futures. Holdings in exchange-traded funds backed by gold rose 6.6 tons to 1,959.1 tons as of Friday, the highest since August 2013, data compiled by Bloomberg show.
The buildup in open interest may increase the risk of a sell-off in bullion should sentiment turn, as “anyone who wants to buy gold is probably already in the market,” according to Cordier.
Silver for immediate delivery slipped 2.1 percent to $19.8932. Prices climbed 8.6 percent in the two days through Monday, the most since May 2011.
“Gold and silver have already come a long way, so perhaps it’s not surprising to see them pull back a little,” Dan Smith, a commodities analyst at Oxford Economics Ltd. in London, said by phone.