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Gold traders step up their bullish bets

TradingPub Admin | July 15, 2013

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If you want some free trading education on information that might be helpful for investing in commodities, you may benefit from knowing that in the last few weeks, hedge funds have sharply increased their wagers that gold will rise in price.

During the week ending July 9, such market participants boosted their net length by 4.1 percent to a total of 35,691 futures and options contracts, according to data provided by the U.S. Commodity Futures Trading Commission and reported by Bloomberg.

This increase in bullish bets came after CFTC data indicated that the net length of these same traders surged 9.1 percent during the week ending on July 2, Bloomberg reports. This happened as these global market participants boosted their holdings of short contracts 1.4 percent to 78,148.

Jeffrey Sherman, who contributes to the oversight of more than $57 billion for Los Angeles-based DoubleLine Capital, noted that the precious metal has experienced sharp declines in value in the recent past, according to the news source.

"People want to own gold for a myriad of reasons, but they've all been disappointed in the last couple of months," Sherman stated. "The lack of inflation and a strong dollar are headwinds that gold faces, and they're not going to change anytime soon. The signs of improvement in the U.S. economy just add to the list."

Bernanke's notes need for QE
Global markets were given somewhat of a boost recently, after they responded to Federal Reserve Chairman Ben Bernanke stating on July 10 that the U.S. economy will probably require "highly accommodative monetary policy for the foreseeable future," Bloomberg reports.

The values of many different assets plunged in June, after Bernanke said immediately after the end of a Federal Open Market Committee meeting that the scope of QE could be lowered, starting as early as this year. He also indicated that these bond purchases could potentially be stopped altogether in 2014.

"Bernanke's comments put some positive feeling back into gold and into all commodities," Dan Denbow, a fund manager at the San Antonio-based USAA Precious Metals & Minerals Fund, told the news source. "The Fed has been working hard to show that taking back a little bit of bond buying isn't removing accommodation, and Bernanke was very firm on that. There was a bit of a sentiment shift."

While this may seem positive for the future of gold prices, it is important to note that in less than one month, the central bank chief provided two statements about the future of QE that were largely different. Just in case this isn't a strong enough example of vacillation, several other prominent officials of the Federal Reserve have also spoken about the future of the bond purchases, providing a range of predictions and input.

Gold predictions
Where the value of the precious metal will go from here is anyone's guess. If you are looking to get some input, you might benefit from the predictions contained in the reports of major financial services firms.

Several of these companies have provided estimates recently that were below prior projections, as Goldman Sachs has predicted that the metal will fall to $1,050 by the end of 2014, and Societe Generale SA has projected that gold could easily extend its recent losses in the near future, according to Bloomberg.

The price of the metal has experienced sharp fluctuations recently, as it plunged 25 percent in 2013, the media outlet reports. Amid this strong decline, the PFR Gold Fund owned by billionaire John Paulson plummeted 65 percent during the year.

If you want to trade this metal effectively, it is important for you to have the right knowledge. If you want more free trading education, you can find it at TradingPub, home to some of the top traders and investors in the industry.