Hedge Funds Raise Gold Wagers But Goldman Predicts Further Drop

Hedge Funds Raise Gold Wagers But Goldman Predicts Further Drop (Bloomberg)

Hedge funds raised bullish gold bets to eight-week highs as signs of stronger Chinese demand drove prices to the longest rally since August. Goldman Sachs Group Inc. predicted 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 trading. Net-bullish holdings across 18 U.S.-traded commodities advanced 2.6 percent, led by cattle, silver and soybeans. Gold, up for four straight weeks, rebounded 4.4 percent this month after a 28 percent plunge in 2013 that was the biggest since 1981 as some investors lost faith in gold 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 Jan. 12 report.

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Paul Dykewicz is the editor of StockInvestor.com and the editorial director of Eagle Financial Publications in Washington, D.C. He writes and edits for the website, as well as edits investment newsletters, time-sensitive trading alerts and other reports published by Eagle. He also is an accomplished, award-winning journalist who has written for Dow Jones, USA Today and other publications, as well as served as business editor of a daily newspaper in Baltimore. In addition, Paul is the author of the inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain." He received his MBA in finance from Johns Hopkins University, where he was a two-time president of the school's Finance Club. In addition, Paul has a bachelor's degree from the University of Michigan and a master's degree in journalism from Michigan State University. Outside of work, Paul volunteers with a faith-based organization to assist the poor in Southeast Washington, D.C., to learn personal finance skills to lift themselves out of debt.