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Gold price: Hedge funds go 233 tonnes short

Falling short

Gold on Monday was clawing its way back to the $1,200 an ounce, a level it hasn’t strayed too far from for the better part of three months.

In quiet late afternoon trade in New York, gold for delivery in August added $6.80 an ounce from Friday’s close to exchange hands for $1,185.60 an ounce, the best level since June 2.

Large investors on the futures market such as hedge funds, referred to as “managed money”, slashed bullish bets by more than 35% by adding massively to shorts and scaling back long positions at the same time.

In the week to June 9 according to the Commodity Futures Trading Commission’s weekly Commitment of Traders data, speculators’ bets on cheaper gold in the future shot up 31% to more than 8.2 million ounces (233.5 tonnes) from the week before.

The latest figures surpasses the 7.7 million in March when gold was hitting lows for 2015 of around $1,150 and comes within shouting distance of the record-breaking short positions going into 2014.

That December 2013 short position was the highest since 2007, back when gold changed hands for $700 an ounce.

“Gold’s inability to attract safe-haven flows as the likelihood of Greece defaulting on its debt increases, is just one example of how investors have become disappointed in the gold market,” according to Germany’s Commerzbank quoted by Kitco:

“Given the poor performance of gold and silver prices, money managers are clearly losing their patience and betting increasingly on falling prices.”

On a net basis hedge funds are now long under 4.5 million ounces, more than 10 million ounces below levels hit in January this year. In January hedge funds built up the largest bullish position since December 2012 when gold was changing hands for more than $1,700 an ounce.

Today’s speculative positioning remains more bullish compared to the 3.1 million ounces position held mid-March however.

Image by artemuestra