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CFTC data suggests that hedge funds are holding their biggest bet on higher prices since mid-September. Money managers raised their combined net-long position in US futures and options by 6.8 percent to 148,279 contracts in the week ended Nov. 1.
By Leia Toovey- Exclusive to Gold Investing News
As turmoil spreads through Europe, this fall, gold has behaved differently. Rather than benefiting from its safe haven appeal, gold has tracked the moves in risky assets and the US dollar. While gold is still the safe haven investment vehicle of choice for many investors, fears of a credit squeeze made cash more appealing than gold. Furthermore, the slump in equities this past September forced liquidation for investors who needed to cover losses. Friday, gold for December delivery rose $28.50, to settle at $1,788.10 an ounce on the COMEX division of the New York Mercantile Exchange.
Gold was given extra impetus from a declining greenback. The dollar index, which tracks the US unit against a basket of six major rivals, slipped to 77.227 from 77.660 late Thursday. A weak greenback makes US dollar based gold more affordable for holders of other currency. The United States released positive economic data on Friday, which would be negative for safe haven gold, however, with the metal shrugged it off. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, compared to 60.9 in October. Analysts had anticipated the index to come in at 61.5.
According to Bloomberg, gold traders are currently the most bullish over the metal’s prospects in at least seven years. Holdings in exchange-traded products backed by gold rose 27.5 tonnes last week, a figure that is just 1 percent off the all-time record. Commodity Futures Trading Commission data show that hedge funds are holding their biggest bet on higher prices since mid-September. Money managers raised their combined net-long position in US futures and options by 6.8 percent to 148,279 contracts in the week ended November 1. Wagers were a record 253,653 contracts in August, a month before prices climbed to an all-time high of $1,923.70.
Demand for calls on SPDR Gold Trust (GLD), the world’s biggest exchange-traded product backed by precious metals, has surged to the highest level since August 8. That day, the ratio jumped to a one-year high of 1.57 on the first trading session after Standard & Poor’s stripped the US of its AAA credit rating.
Company news
The world’s largest gold producer, Barrick Gold Corp. (NYSE:ABX), is on the lookout to buy smaller assets near existing mines as part of its strategy to boost output. Barrick will look at such opportunities while also focusing on larger, “substantive” projects, Chief Executive Officer Aaron Regent said in a November 9 interview at the company’s Toronto headquarters. Regent added that Barrick will follow a “balanced approach” to increasing production that includes acquisitions, project development and finding deposits through exploration. World gold supply will remain constrained even amid rising prices because few big new deposits have been discovered, he said. “The industry is going to continue to struggle to maintain supply,” Regent said, adding “It might go up a little bit, but then it’s going to come back down.” Barrick is forecasting its own gold production will be 7.6 million to 7.8 million ounces this year. Output was 7.8 million ounces in 2010. The company is targeting annual output of 9 million within five years.
Gilman Law LLP, is investigating shareholder allegations that Agnico-Eagle Mines Limited, (NYSE:AEM) and certain officers and directors violated the Securities Exchange Act of 1934, by issuing false and misleading information concerning the company’s overall operational and financial condition and well-being resulting from significant problems in the company’s mining operations and gold production at its Goldex mine in Val d’Or Quebec.
Securities Disclosure: I, Leia Toovey, hold no direct equity interest in any company mentioned in this article.