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Gold Bulls Retreat as Prices Drop to Four-Month Low: Commodities

December 3, 2013

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Dec. 3 (Bloomberg) -- Hedge funds grew less bullish on gold for a fourth straight week, the longest stretch since November 2012, as mounting concern that the Federal Reserve will curb monetary stimulus sent prices to a four-month low.

The net-long position in gold fell 28 percent to 31,735 futures and options in the week ended Nov. 26, the lowest since June, U.S. Commodity Futures Trading Commission data show. Short bets rose 20 percent to 74,964, the highest since July. Net- bullish wagers across 18 U.S.-traded commodities gained 11 percent to 563,786 contracts as soybean holdings climbed. Bets on a decline for wheat prices reached a record.

Gold is heading for the first annual drop in 13 years after equities rallied to the highest since 2008 and inflation failed to accelerate. Fed policy makers signaled Nov. 20 that the labor market will improve enough to warrant slowing their $85 billion of monthly bond purchases. U.S. manufacturing unexpectedly accelerated in November at the fastest pace in more than two years, a private report showed yesterday.

"With an improving economy and job market, coupled with Fed actions, gold will continue to deteriorate," Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $150 billion of assets, said by telephone. "There’s no need for a safe haven. There’s no need to be overweight in gold."

Futures reached $1,217.10 an ounce after the close of regular trading in New York yesterday, the lowest since July 8. Eighteen analysts surveyed by Bloomberg News expect bullion to fall this week, nine were bullish and three neutral. The metal fell 5.5 percent in November, the biggest drop since June, when prices reached a 34-month low.

 

2013 Losses

 

Bullion tumbled 27 percent this year, heading for the biggest annual slump since 1981. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.6 percent. The MSCI All- Country World Index of equities climbed 18 percent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, rose 3.6 percent. The Bloomberg Treasury Bond Index fell 2.5 percent.

Some investors have lost faith in the metal as a store of value as prices tumbled into a bear market in April after the U.S. economic recovery gained traction.

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