Hedge funds cut wagers on a gold rally for the first time in three weeks on mounting speculation central banks will curb record stimulus and as this year’s slump in bullion spurred losses for billionaire John Paulson.
The funds and other large speculators lowered their net- long position by 4.1 percent to 54,779 futures and options by June 11, U.S. Commodity Futures Trading Commission data show. Net-bullish wagers across 18 U.S.-traded commodities rose 0.1 percent. Bearish copper bets more than doubled as the metal had its longest slump since November. Cocoa holdings advanced to the highest since 2008 before the biggest weekly slide since January.
The Bank of Japan left a lending program unchanged on June 11 and refrained from expanding its toolkit for tackling volatility in bonds. Federal Reserve policy makers meeting this week may discuss slowing $85 billion of monthly debt purchases amid signs of a sustained economic recovery. Gold surged 70 percent as the Fed bought $2.3 trillion of debt from December 2008 through June 2011. Paulson’s Gold Fund tumbled 13 percent in May, extending this year’s loss to 54 percent.
“There’s definitely a concern that if the Fed starts to remove the monthly purchases, that’s certainly signaling a strengthening in conditions, and that puts a bid into the dollar and certainly at the margin hurts gold,” said Ted Harper, a fund manager at Frost Investment Advisors LLC in Houston, who helps manage more than $9 billion of assets. Paulson’s “returns are emblematic of the difficult environment that gold investors have been facing,” he said.
Bear Market
Gold futures tumbled into a bear market in April and are now down 17 percent since the start of the year at $1,384.70 an ounce, heading for the first annual decline since 2000. Bullish bets slumped 78 percent from a record in August 2011 and the metal is 28 percent below its all-time high of $1,923.70 reached in September 2011. Prices advanced 0.3 percent last week.
The Standard & Poor’s GSCI Spot Index of 24 commodities rose less than 0.1 percent last week, while the UBS Bloomberg CMCI gauge of 27 raw materials lost 0.8 percent. The MSCI All- Country World Index of equities fell 0.7 percent and the dollar was down 1.2 percent against six major trading partners. A Bank of America Corp. index shows Treasuries returned 0.3 percent.
Asset Purchases
Fed Chairman Ben S. Bernanke said last month the central bank could curtail its bond purchases if the U.S. employment outlook shows a sustainable improvement. Policy makers will trim purchases to $65 billion a month in October, the median of 59 economist estimates compiled by Bloomberg this month shows.
Gold traders turned bearish for the first time in a month, with 18 analysts surveyed by Bloomberg anticipating declining prices this week. Fourteen were bullish and four neutral, the largest proportion of bears since May 17.