Hedge funds increased bullish gold wagers to its peak in more than eight weeks which is indicative of a stronger Chinese demand in driving prices to the longest rally since August of last year.
The net-line position in gold rose to 7.6 % to 43,277 futures along with options in the week ending last week. Commodity Futures Trading Commission data reveal that long wagers also increase 4.7 % which outpaced the 2.9 % gains in short bets . Net-bullish holding scattered across 18 U.S.-traded commodities were able to advance 2.6 % led by silver, cattle and soybean commodities.
Gold was able t climb for four consecutive straight weeks which rebounded 4.1 % this month following a 28 % drop last year which was its largest decline in more than a decade with some investors losing faith in terms of store value. Lower prices are enticing buyers in Asia, with deliveries by the Shanghai Gold Exchange which almost doubles last year. The bearish market is not likely to reverse and bullion will grind lower over this year as the U.S. economy gains more momentum.
The continuous demand for jewellery in China is still comparatively strong and will remain to be so. The bears ignore physical demand and believe that gold is not as important when it there is no economic crisis.
The Fed will be trimming its monthly asset purchases to $75 billion, $10 billion less from its previous month asset purchases. Futures have dropped 35 % from a record of $1,923 in the past three years.
Investors are holding through the ETPs decline of 33 % in the past year which erased more than $71.3 billion from the value of its funds. Bullish bets on crude oil slid down 7.1 % and prices climbed 1.8 % the week prior. Stockpiles in the U.S. reached a staggering 350.2 million barrels as of January this year.
The prices in New York capped the first weekly gain this year as indications of quickening economic growth bolstered the outlook for demand as gains in manufacturing boost consumption.
A measure of speculative positions in the span of 11 agricultural products increased 35 %, its largest rise since August of last year. Soybean holdings climbed 17 %, its biggest increase in more than nine weeks. Investors were less bearish on wheat by trimming their bet-short position to 56, 482 contracts more than 17,000 less than a week earlier which was considered the largest bet on a decline since data commenced eight years ago.
The futures in New York went up 0.4 % last week as the Standard & Poor’s GSCI Spot Index of 24 raw materials for the metal sector climbed 0.9 %. The MSCI All-Country World Index of equities gained a meagre 0.1 %. According to the Bloomberg Sport Dollar Index, a gauge against 10 major trading partners were able to advance a total of 0.8 %.
The Shanghai Gold Exchange was able to deliver 2,197 metric tons to its clients last year as compared to only 1,139 tons the year before. Moreover, China topped India as the global leader last year as demand probably reached a record according to the World Gold Council estimates.
The U.S. Mint was able to sell 83, 500 ounces of American Eagle coins during the start of the year which is speculated to be the largest monthly sale since last year. Holdings in the SPDR Gold Trust jumped 0.9 % which was its largest gain in more than two years.
Prices will most probably increase to $1,400 by the end of the year as the trend of traders selling in the ETFs overturn the demands in Asian gains.