More hedge funds are cutting bets on gold as the bullion hits its worst annual loss in 32 years and related exchange traded funds became the most shunned investment strategy of the year.
Hedge fund managers pulled back net-long positions by 2.8% to 32,524 futures and options in the week ended Dec. 17, reports Joe Richter for Bloomberg. Meanwhile, short holdings rose 1.2% to 75,199, within 6% of the record high in July.
“Gold was probably one of the easiest shorts of all time,” Uri Landesman, the president of hedge fund Platinum Partners, said in the article. “It has fallen out of favor because people felt its general security wasn’t needed in this market. People wanted to take on risk this year.”
The SPDR Gold Shares (NYSEArca: GLD), the largest gold-related ETF on the market, saw $24.4 billion in outflows year-to-date. All in all, investors yanked $38.8 billion out of gold funds this year, the most since data was kept going back through 2000. [Gold ETFs Bleed Again in December]
COMEX gold futures are hovering around $1,198 per ounce, falling 29% this year and set to experience its first annual loss since 2000.
Gold “is now likely to grind lower throughout 2014,” Jeffrey Currie, the head of commodities research at Goldman Sachs Group Inc., said in the article.
Goldman Sachs projects prices will reach $1,050 by the end of 2014. [2014 Could be a Sequel for Gold and That’s not Good]
Nevertheless, some gold observers hold onto the long-term merits of investing in gold, especially when inflation begins to rise in a growing economy.
“We expect that as the economy recovers, which is the reason they’re tapering, inflation will come back,” Tom Winmill, a manager for Midas Funds, said in the article. “The long-term outlook is exceedingly bullish for gold.”
SPDR Gold Shares
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Max Chen contributed to this article.