For a measure of how much this week’s surge in gold prices might have caught many in the market by surprise, consider that hedge funds had just made their biggest-ever bearish wager on the metal days before.
Speculators boosted their net-short position in bullion futures and options to the largest since at least 2006 in the week that ended Tuesday, according to government data released three days later. By Thursday, gold was extending a rally, climbing by the most since 2016 as a rout in global stock markets and weaker-than-expected US inflation raised bets that the US Federal Reserve would slow the pace of interest-rate increases.
After the big jump on Thursday, gold lost 0.5 percent on Friday to hit US$1,222 an ounce, but was up 1.6 percent from last week’s US$1,202.83.
The abrupt turnaround snapped gold out of its recent doldrums. The metal had been stuck in a rut as surging stock markets and the prospect of tighter US monetary policy torpedoed any small rally bulls could muster.
Higher rates generally curb the appeal of bullion, which does not pay interest. Gold prices had held near US$1,200 since late August, with a measure of volatility sliding to an eight-month low last week.
“Sentiment for gold should improve given the risk rising in the equity market,” said Maxwell Gold, a director of investment strategy at Aberdeen Standard Investments, which oversees about US$730 billion. “Right now is an attractive time to strategically add positioning for gold investment to hedge against concerns on equity volatility and add to diversification.”
‧Silver rose 0.2 percent to US$14.64 an ounce.
‧Copper slipped 0.1 percent to US$2.80 a pound.
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