Hedge Funds Raise Gold Wagers

Posted: January 19, 2014 | Author: | Filed under: Forecasts, Gold, Hedge fund, Precious Metals | Tags: , , , , , , , | Leave a comment

 

Hedge funds raised bullish gold wagers to the highest in eight weeks as signs of stronger Chinese demand drove prices to the longest rally since August. Goldman Sachs Group Inc. says the gains will be short-lived.

The net-long position in gold climbed 7.6 percent to 43,277 futures and options in the week ended Jan. 14, U.S. Commodity Futures Trading Commission data show. Long wagers rose 4.7 percent, outpacing the 2.9 percent gain in short bets. Net-bullish holdingsacross 18 U.S.-traded commodities advanced 2.6 percent, led by cattle, silver and soybeans.

Gold climbed for four straight weeks, rebounding 4.1 percent this month after a 28 percent plunge in 2013 that was the biggest since 1981 as some investors lost faith in the metal as a store of value. Lower prices are attracting buyers in Asia, with deliveries by the Shanghai Gold Exchange almost doubling in 2013. The bear market is unlikely to reverse, and bullion will “grind lower” over 2014 as the U.S. economy gains momentum, Goldman analysts said in a report Jan. 12.

“There’s a tremendous divide in the gold market,” said Jeff Sica, who helps oversee more than $1 billion of assets as president of Sica Wealth Management in Morristown, New Jersey. “Demand for jewelry in China is still relatively strong, and I think it will remain strong. The bears ignore physical demand and think that gold is not relevant when there’s no economic crisis.”

Gold Rally

Futures in New York rose 0.4 percent last week to $1,251.90 an ounce, as the Standard & Poor’s GSCI Spot Index of 24 raw materials climbed 0.9 percent. The MSCI All-Country World index of

equities gained 0.1 percent. The Bloomberg Dollar Spot Index, a gauge against 10 major trading partners, advanced 0.8 percent. The Bloomberg Treasury Bond Index added 0.2 percent.

The Shanghai Gold Exchange, China’s largest bullion bourse, delivered 2,197 metric tons to customers in 2013, compared with 1,139 tons in 2012, it said Jan. 15. The Asian country topped Indiaas the world’s top buyer last year as demand probably reached a record, the World Gold Council estimates.

The U.S. Mint sold 83,500 ounces of American Eagle gold coins so far in January, heading for the biggest monthly total since April. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, jumped 0.9 percent on Jan. 17, the biggest gain since November 2011. A day earlier, the assets were at the lowest level since January 2009.

Prices will probably rise to $1,400 by the end of the year as the trend of investor selling in ETFs reverses and demand in Asia gains, Commerzbank AG analysts led by Eugen Weinberg in Frankfurtsaid in a report Jan 17.

Goldman View

Goldman expects bullion to fall to $1,050 in the next 12 months as the Federal Reserve reduces monetary stimulus, analysts led byJeffrey Currie, the bank’s head of commodities research, said in the report last week. Precious metals are Morgan Stanley’s “least

preferred” commodities, and physical demand from China and India won’t be enough to support prices, analysts Adam Longson, Bennett Meier and Peter Richardson said in a Jan. 17 report.

The Fed, which said in December it would trim its monthly asset purchases to $75 billion from $85 billion, will probably keep cutting bond buying by $10 billion at each policy meeting, according to a Bloomberg survey of economists on Jan. 10. The central bank next meets Jan. 28-29. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system. Futures have plunged 35 percent from a record $1,923.70 in September 2011.

ETP Holdings

Investor holdings through ETPs fell 33 percent in the past year, erasing $71.7 billion from the value of the funds, data compiled by Bloomberg show. Billionaire John Paulson, the largest holder in the SPDR Gold Trust, said in November that he personally wouldn’t invest more money into his bullion fund because it’s not clear when inflation will quicken.

“The concern is that the good economic news means the Fed will pull its taper off faster than people expect,” said Dan Denbow, a fund manager at the $950 million USAA Precious Metals & Minerals Fund in San Antonio. “What’s going to drive gold higher would be more concerns about geopolitical risks, an inflation scare and just a lack of good news. We still don’t see that happening.”

 

 

Peter Schiff : Self Promotion Helps Him – Investors Not So Much

Posted: November 4, 2013 | Author: | Filed under: Gold, Inflation, Jack a. Bass Managed Accounts, Peter Schiff, Precious Metals, Quantitative Easing | Tags: , , , , | Leave a comment

The unabashed gold bug’s Euro Pacific Capital Inc. manages a $20 million mutual fund that invests in stocks related to the metal and lost 6.4 percent since it began in July. The Philadelphia Stock Exchange Gold and Silver Index slid 1.8 percent in the same period.

Peter Schiff, chief executive officer and chief global strategist of Euro Pacific Capital Inc., predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year. Photographer: Haruyoshi Yamaguchi/Bloomberg

Peter Schiff, chief executive officer and chief global strategist of Euro Pacific Capital Inc. Photographer: Jin Lee/Bloomberg

Schiff, 50, isn’t fazed that gold is heading for its first annual price drop in 13 years, or that Goldman Sachs Group Inc. has called it a “slam-dunk sell.” He predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year. That’s just the beginning: Before President Barack Obama leaves office in 2017 the U.S. will default, the dollar will collapse, hyperinflation will strike and gold will skyrocket, he says.

“I’m waiting for the dollar crash, I’m waiting for the real crisis to hit that I know will benefit gold,” Schiff said Oct. 18 over lunch of spinach-and-beet salad and stewed rabbit in the sun room after the radio show. “The longer it takes, the longer I have to wait for that payday. But the longer it takes, the bigger that payday is going to be.”

Critics Laugh

With inflation at or below the Fed’s 2 percent target for the past 11 months, the Standard & Poor’s 500 stock index reaching record levels and the dollar strengthening against major currencies in the past year, Schiff knows his forecasts make some people laugh. He’s used to it. They also scoffed in 2006 when he predicted on television that housing pri

ces would plunge, lenders would go bankrupt and stocks would plummet, as they did two years later.

“They should take him seriously — he was right with a lot of other ones,” Ron Paul, the former Republican Representative from Texas who has called for abolishing the Federal Reserve and auditing the U.S. gold depository at Fort Knox, Kentucky, said by phone on Oct. 23. Schiff was an economic adviser to Paul’s presidential campaign in 2007.

No Danger

“They don’t want to admit that people in the free market are right because they would have to give up government planning and government power and give up their wars and give up the welfare state,” Paul said.

Schiff’s predictions don’t persuade Austan Goolsbee, an economics professor at the Booth School of Business at the University of Chicago and former chairman of the Council of Economic Advisers under Obama.

Gold bugs, investors who buy the metal as protection against a collapse in financial assets, fail to understand that the Fed’s pumping money into the economy only offsets banks’ tighter lending and stockpiling cash, Goolsbee said. Until credit conditions return to “normal,” there’s no danger of inflation, he said.

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