Hedge Funds jump on gold for safety

Investors are also loading up on the metal through exchangetraded products

There’s no stopping the gold bulls. Hedge funds increased their wagers on a gold rally to the highest since November, betting that this year’s 12 per cent advance has more to go. Investors are also loading up on the metal through exchangetraded products, pouring $487 million (Dh1.79 billion) into SPDR Gold Shares on Wednesday. That was the biggest daily inflow into the world’s top bullion ETF in seven months.

Gold is shining bright as the dollar trades near the lowest since November, lifting the appeal of alternative assets. At the same time, escalating tensions between the US and North Korea have boosted demand for a haven, while delays in implementation for President Donald Trump’s campaign promises to cut taxes and pursue a progrowth agenda are clouding the outlook for earnings.

“There’s an appetite for storehouses of wealth at this point,” said Peter Sorrentino, the Dallas-based chief investment officer of Comerica Asset Management Group, which oversees $43 billion, including gold ETFs. “Rather than run the risk of having your dollars eroded on a relative basis, you can use gold as a life raft to sort of avoid a sinking ship.”

Bullish wagers

Money managers raised their gold net-long position, or the difference between bets on a price increase and wagers on a decline, by 15 per cent to 161,263 futures and options contracts in the week ended April 18, according to US Commodity Futures Trading Commission data released three days later.

While investors are bullish on gold, prices took a knock yesterday on speculation that pro-growth centrist Emmanuel Macron will become France’s next president by defeating far-right nationalist Marine Le Pen in the second round of the presidential elections on May 7.

Gold futures in New York fell 1 per cent to $1,276.30 an ounce yesterday, paring the month’s gain to 2 per cent.

Standard Chartered Plc and Bank of America Merrill Lynch say the metal is headed towards $1,300, while Societe Generale recommends investors take long positions in the metal.

Geopolitical tensions are giving gold a boost, Standard Chartered analysts including Suki Cooper, wrote in a note April 18. Last week, Vice President Mike Pence said North Korea shouldn’t doubt Trump’s resolve after his “decisive action” against Syria and Afghanistan.

Events in Europe have also been a boon for gold. There are still doubts over where the UK’s post-Brexit economy is heading. In France, a presidential election runoff is scheduled for May 7. Demand for gold coins is surging in the nation, with CoinInvest selling more than 1,000 ounces on Friday.