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Gold Bears Return Before Yellen Signals More Easing: Commodities

November 18, 2013

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Nov. 18 (Bloomberg) -- Investors got less bullish on gold as hedge funds doubled their short holdings just before prices erased a weekly loss and Janet Yellen pledged to press on with economic stimulus if confirmed as Federal Reserve chairman.

The net-long position in gold slumped 37 percent to 55,456 futures and options in the week ended Nov. 12, U.S. Commodity Futures Trading Commission data show, the biggest drop since February. Short bets climbed to 54,143, the highest since mid- August, from 26,490 a week earlier. Net-bullish wagers across 18 U.S.-traded commodities dropped 12 percent to 576,224 contracts as investors became more bearish on wheat and cut their silver holdings by the most in five months.

Gold is heading for the first annual loss since 2000 after some investors lost their faith in the metal as a store of value. Global equities advanced to the highest in almost six years and U.S. inflation is running at 1.2 percent, half the rate of the past decade. Bullion reached a record in 2011 as the Fed pumped more than $2 trillion into the financial system. Gold rallied as Yellen said Nov. 14 she’s ready to back stimulus until she sees robust economic growth.

"People were feeling very bearish before Yellen’s statement," said Donald Selkin, who helps manage about $3 billion as the New York-based chief market strategist at National Securities Corp. "Her comments were dovish and can be seen as a postponement to tapering, which is definitely helpful for gold. But, the main reasons why gold has fallen are intact. Inflation is low, and equity markets continue to march ahead."


Gold Rebound


Futures tumbled 3.7 percent in the five sessions before Yellen’s testimony before the Senate Banking Committee. Prices rebounded 1.5 percent in the next two days, erasing the week’s losses and capping the biggest two-day rally since Oct. 22. Eighteen analysts surveyed by Bloomberg News expect prices to gain this week, nine are bearish and two neutral, the largest proportion of bulls since Oct. 4.

Gold slumped 24 percent this year on the Comex in New York, heading for the biggest annual loss since 1981. The Standard & Poor’s GSCI gauge of 24 commodities fell 5.2 percent. The MSCI All-Country World Index of equities gained 18 percent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, rose 2.9 percent. The Bloomberg Treasury bond Index lost 2.3 percent.


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