Hedge funds reduced bullish bets on commodities to the lowest point this year as speculation about Grexit and a widening Eurozone crisis and a slump in demand for metals and minerals from China, the sector's growth engine, sapped confidence.
Gold bets fell for a second week to the lowest since December 2008 after hedge funds liquidated $2.2 billion worth of positions in bullion last week.
Net long positions or bullish bets now total $12.2 billion. Gold enjoyed a $50 an ounce rally on Thursday and Friday – the metal's sharpest two-day rally since October – "a rebound believed to have caught a number of funds that had been on the short end of the market," according to Reuters.
Bloomberg reports gold was by no means the only commodity that suffered from skepticism and thirteen of the raw materials tracked by S&P declined last week, but negativity against gold was deepest:
“People were beginning to believe that gold can stand up against all crises, but the last six months proved that theory wrong,” said Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets. “Gold needs to come back to more realistic levels, which is about $1,100.”