Gold ETFs could see action this week as the Federal Reserve wraps up a two-day policy meeting on Wednesday, followed by a press conference with Fed chief Ben Bernanke.
Hedge funds and large speculators are reducing bets on gold for the first time in three weeks ahead of potential cuts in Fed stimulus measures.
Large institutional investors lowered net-long positions by 4.1% as of June 11, reports Elizabeth Campbell for Bloomberg.
“There’s definitely a concern that if the Fed starts to remove the monthly purchases, that’s certainly signaling a strengthening in conditions, and that puts a bid into the dollar and certainly at the margin hurts gold,” Ted Harper, a fund manager at Frost Investment Advisors LLC, said in the article.
Gold futures have been trading in bear market territory since April, down 17% since the start of the year. Gold is currently trading around $1,382 per ounce and is moving toward its first annual dip since 2000.
Traders are becoming more bearish for the first time in a month. According to a recent Bloomberg survey, 18 analysts are anticipating a declining price this week, 14 were bullish and 4 neutral, marking the largest ratio of bears since May 17.
Goldman Sachs anticipates gold will continue to slide over the mid-term on a “re-acceleration” in U.S. growth and unwinding ETF positions.
Meanwhile, Paulson & Co has recommended investors in its Gold Fund to remain invested as valuations provide “significant upside.” Paulson is the largest investor in GLD. [Traders See Gold Bargains as ETFs Shed $45 Billion]
GLD, ETFS Physical Swiss Gold (NYSEArca: SGOL) and iShares Gold Trust (NYSEArca: IAU) have all declined about 17.0% year-to-date.
According to IndexUniverse data, GLD saw $2.1 billion in asset outflows over the past month, SGOL lost $137.4 million in assets and IAU shed $320 million in assets.
SPDR Gold Trust
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.