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Hedge Funds Go ‘All in on Gold’

Gold bars of different weights sit inside a safety deposit box in the precious metals vault at Pro Aurum KG in Munich, Germany, on Wednesday, July 10, 2019. Gold rose for a third day after the Federal Reserve indicated that its preparing to cut interest rates for the first time in a decade as the global economy slows. Photographer: Michaela Handrek-Rehle/Bloomberg via Getty Images


Gold’s rally since December 2018 is just getting started if hedge funds have their way.

Prices are already at the highest in more than 6 years, and Goldman Sachs and Citigroup predict the precious Yellow metal could climb more than 6% to $1,600 oz by year’s end.

Money managers are going all in, raising their wagers on a rally to the highest since Y 2016.

Gold’s value as a haven is shining bright on mounting global uncertainty over the US-China trade dspute and slowing economic growth.

President Trump has escalated his stranglehold on Beijing, and his Treasury Department formally labeled China a currency manipulator.

President Trump has also ‘demanded’ the Fed to further cut interest rates and weaken USD. Meanwhile, $15-T of debt globally have negative yields, and investor demand shows no sign of abating.

In the week ended 6 August hedge funds increased their gold net-Long position by 23% to 285,082 futures and options, according to US Commodity Futures Trading Commission data published Friday.

The holding, which measures the difference between bets on a price increase and wagers on a decline, was the highest since July 2016. The move came as Long-only holdings also hit a 3-year high, while Short wagers fell for a 3rd week running.

Gold futures for Dec delivery gained 3.5% on the week ended Friday to settle at $1,508.50 on the COMEX in New York.

The CBOE/Comex Gold Volatility Index, a measure of price swings, recently touched the highest since December 2016. The measure is still less than 50% of what it was when gold climbed to its record at 1,900 oz in Y 2011.

Investors look willing to endure the volatility in hope of more price gains.

Holdings in global ETFs backed by the metal are at the highest since March 2013.

SPDR Gold Trust ETF GLD is the largest and most popular ETF in the gold space with AUM of $39.3-B and average daily volume of around 8.3-M shares. The fund tracks the price of gold bullion measured in USDs and kept in London under the custody of HSBC Bank USA. Expense ratio comes in at 0.40%

Meanwhile, traders and analysts have switched to a strongly Bullish position, with 69% expecting price gains and none Bearish for the 1st time since March, according to our survey.

Notably, HeffX-LTN called the reversal in December and have been in the gold buying market since. We are Bullish gold.

Have a terrific weekend

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