Hedge funds raised wagers on a gold rally as speculation that the Federal Reserve will hold off on curbing stimulus drove prices toward the biggest gain in 18 months. Goldman Sachs Group Inc. expects the rally to reverse.
Money managers increased their net-long position by 26 percent to 70,067 futures and options as of July 23, U.S. Commodity Futures Trading Commission data show. The fourth consecutive weekly gain is the longest streak since October. Bullish wagers across 18 U.S.-traded commodities gained 7.4 percent to 615,140. Investors more than doubled bets on lower corn prices to a record net-short holding.
Gold futures rose 8.6 percent in July, heading for the largest monthly gain since January 2012, as Fed Chairman Ben S. Bernanke damped speculation that a cut in bond purchases is imminent. The metal remains in a bear market reached in April and is heading for the first annual loss in 13 years after some investors lost faith in bullion as a store of value. Goldman said July 22 that prices are likely to decline.
“Buyers are expecting that the tapering program that’s been much ballyhooed won’t begin quite as soon as a lot of people anticipated,” said Mark Luschini, the chief investment strategist of Janney Montgomery Scott, which oversees about $58 billion of assets. “It’s been a good month in a bad year.”
Gold Gains
Gold climbed 2.2 percent to $1,321.90 an ounce on the Comex in New York last week, the third consecutive gain, and advanced to $1,329.40 today. The Standard & Poor’s GSCI Spot Index of 24 commodities dropped 2.1 percent, while the MSCI All-Country World index of equities rose 0.3 percent. A Bank of America Corp. Index shows Treasuries lost 0.2 percent.
More Americans than forecast filed for unemployment benefits last week and sales of previously owned U.S. homes unexpectedly fell in June, underscoring speculation that growth is not yet strong enough for the Fed to pull back from its asset purchases. Ending the $85 billion in monthly bond buying will depend on the performance of the economy, Bernanke said during testimony to Congress July 17.
The metal more than doubled from the end of 2008 to an all- time high of $1,923.70 in September 2011 as the Fed cut interest rates to a record low and bought debt. Russia and Kazakhstan expanded their bullion reserves for a ninth straight month in June, International Monetary Fund data showed July 25. Central banks will buy about 400 metric tons in 2013, after adding almost 535 tons last year, the most since 1964, according to the London-based World Gold Council.
Goldman View
Prices will decline as the U.S. economy improves, prompting a “less accommodative monetary policy stance,” Goldman analysts led by Jeffrey Currie, the bank’s head of commodities research in New York, wrote in a July 22 report. The metal will drop to $1,050 by the end of next year, the bank forecasts. Confidence among American consumers reached a six-year high in July, a private report showed July 26.