Hedge funds pull out of gold as price falls

The Denver Post - - BUSINESS - By Luzi Ann Javier

Gold is in the dol­drums. Prices have fallen for six straight weeks, the worst streak in a year, as prospects for higher U.S. bor­row­ing costs damped de­mand for gold, a non-in­ter­est-bear­ing as­set. Hedge funds cut their bets on a rally to the lowest since Fe­bru­ary, while out­flows are ramp­ing up from ex­change-traded funds.

Af­ter the metal’s best first half since 1979, bul­lion has been los­ing its lus­ter as U.S. eq­ui­ties ral­lied to records. A stronger dol­lar and ris­ing bond yields have also crimped de­mand. Fed­eral Re­serve of­fi­cials last week sig­naled a steeper path for in­ter­est rates in 2017, af­ter rais­ing bor­row­ing costs for the first time this year. While money man­agers have cut their wa­gers on a gold rally for five weeks, their net-po­si­tion is still more than dou­ble what it was at the end of Jan­uary.

“Peo­ple are still too op­ti­mistic on gold,” said John LaForge, the Sara­sota, Fla.-based head of real as­sets strat­egy at Wells Fargo In­vest­ment In­sti­tute. “We’re in a price pur­ga­tory for a lot of com­modi­ties, in­clud­ing gold. You’re go­ing to have a lot of in­vestors and strate­gists like my­self re­duce their price fore­casts.”

The net-long po­si­tion, or bets on price gains, for gold de­clined 15 per­cent to 68,905 fu­tures and op­tions con­tracts in the week ended Dec. 13, ac­cord­ing to U.S. Com­mod­ity Fu­tures Trad­ing Com­mis­sion data. The hold­ings are down 61 per­cent over the five-week slump.

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