Sun, Mar 10, 2019 - Page 14 News List

Hedge funds dumped gold bets before jobs data rally

Bloomberg

Gold bars and coins are displayed at Merrion vaults in Dublin on Jan. 7.

Photo: AFP

Hedge funds are looking like fair-weather friends when it comes to gold.

Investors dumped their bullion holdings as the metal flirted with erasing this year’s advance.

However, the move could prove to be premature.

On Friday, prices got a jolt after a report showed that US hiring last month was the weakest in more than a year. The news helped gold push back above US$1,300 an ounce amid renewed demand for a haven.

Spot gold later settled at US$1,298.30 an ounce, down 1.14 percent for the week.

Gold has been caught in a tug of war. Four straight months of price gains amid economic hand-wringing gave way to losses last month as the US dollar gained traction.

Investors are having to pick sides, said Chad Morganlander, a portfolio manager at Washington Crossing Advisors, which oversees US$2.5 billion.

“I caution investors not to be so negative on haven assets, in particular as we start to see signs of the global deceleration,” Morganlander said, adding that Friday’s US jobs report could be a harbinger of things to come. “Over the next three to six months, the trading perspective will start to shift to be more risk-averse.”

In the week that ended on Tuesday, hedge funds cut their gold net-long position by 54 percent to 47,872 futures and options, US Commodity Futures Trading Commission data showed on Friday.

The holding, which measures the difference between bets on a price increase and wagers on a decline, was the lowest in six weeks.

The move came as short holdings jumped 21 percent, the most since July last year.

Even while investors have trimmed their bullish holdings, they are still betting on price gains. The funds have been net-positive since early December.

Friday’s job numbers represented “a potential buying opportunity for gold,” Will Rhind, the chief executive officer at GraniteShares Gold Trust, said in an interview at Bloomberg headquarters in New York. “We have a world which is slowing and you have central banks around the world loosening monetary policy for that precise reason.”

CORN

Hedge funds increased their net-short corn holding to 176,777 contracts. That is the most bearish since January last year.

May corn futures dropped to a record low Friday in Chicago on signs that US silos are bulging with excess inventories.

The US government pegged domestic inventories higher than analysts had forecast and cut its outlook for use of the grain in biofuel.

Even though there is more capacity to produce ethanol in the US than ever, low biofuel prices and comparatively higher costs for corn have made it difficult for producers to profitably operate facilities.

WHEAT

Investors became more bearish on wheat as the world faces a global glut of the grain. The net-short holding reached 72,449 contracts, the most negative outlook in 11 months.

Global competition is ratcheting up for grain shipments, much to the chagrin of US farmers.

Favorable weather from Russia to North America has led to optimistic crop forecasts for the coming season and, in its first outlook for this year, the UN has said global wheat output might climb 4 percent.

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