Money managers cut bets on higher prices by 70 percent since October, U.S. Commodity Futures Trading Commission data show. Speculators held a net-long position of 60,126 futures and options as of March 26. They held 39,631 contracts in the week to March 5, the least since July 2007, the data show.
Gold, which generally earns returns only through price gains, averaged a record $1,669 last year as nations pledged more stimulus. The Fed is currently purchasing $85 billion of Treasury and mortgage debt a month.
U.S. growth will slow to 1.75 percent this quarter, compared with 2.05 percent in the first quarter, according to the median estimate of as many as 74 economists compiled by Bloomberg. Expansion will then accelerate each quarter through mid-2014. The U.S. Dollar Index, a measure against six currencies, climbed to an almost eight-month high on March 27 and is up 3.6 percent this year.
Mining Companies
Mining companies have so far held off locking in prices by selling future production, and companies are still reluctant to hedge, Societe Generale said. Barclays Plc expects net hedging of 20 tons this year and 35 tons in 2014. Annual production is about 2,700 tons.
“A sustained fall below $1,400 an ounce could unleash fresh waves of producer hedging not associated with project- related hedging by miners looking to finance development projects,” Societe Generale said. “A downward price spiral could see gold locked into a vicious downward cycle as increased producer hedging prompts ever lower gold prices and, in turn, more producer hedging.”