Gold price: Hedge funds increase bearish bets again |
- Gold price: Hedge funds increase bearish bets again
- Norman: Wrong to use US rate to judge gold as inflation hedge
- Codelco's Chuquicamata copper mine strike over
| Gold price: Hedge funds increase bearish bets again Posted: 22 Dec 2013 04:25 PM PST The gold price regained the psychologically important $1,200 an ounce level on Friday, recovering from a more than 3-year low following a decision by the US Federal Reserve to make cuts to its economic stimulus program. The cutbacks announced by the Fed which boosted the dollar caused the gold price to drop 3.5% or more than $40 an ounce to a more than 3-year low and the weakest closing level for the metal since August 2010. Data from US Commodity Futures Trading Commission show in the run-up to the Fed decision hedge funds cut their bets that the price of the metal would fall to close to record levels. Short positions – bets that price would decline – held by managed money increased to 75,199 lots in the week to December 17 according to CFTC data released after the market close on Friday, within shouting distance of the more than 7-year high above 80,000 lots reached the week before. The increase in shorts also led to a decline in the net-long positions held by commercial traders in the precious metal by 2.8 percent to 32,524 futures and options So many big players short of gold could translate into further upside for the metal as large investors are forced to cover their positions ahead of year-end closeouts and book-balancing. While institutional money keeps flowing out of precious metals, retail interest in the metal may be picking up. Liquidation of gold-backed ETFs – which collectively represents something akin to "the people's central bank" – has been cited as a major factor in the fall of the gold price this year. The world's physical gold trusts have experienced net redemptions of more than 800 tonnes collectively, with the value of precious metals assets investments falling by a record $78 billion in 2013. On Friday some confidence creeped back into the market with holdings of SPDR Gold Shares (NYSEARCA: GLD) – the world's largest gold ETF by a wide margin – increasing for the first time in more than six weeks.
In a classic case of bargain hunting, investors bought a net 5.4 tonnes of gold on Friday, the first increase in tonnage held in trust by GLD since the 2.1 tonnes inflow recorded on November 5, the only day that month that buyers topped sellers. December's net redemptions still tally almost 30 tonnes and year-to-date outflows are more than 530 tonnes, but investors picking up nearly 200,000 ounces after gold's dive the day before may signal a bottom in the market. The price of gold is down some 28% in 2013 and is set to break its 12-year bull run that took it from around $270 an ounce at the end of 2000 to a record high above $1,900 in September 2011. Gold's $480 an ounce fall in 2013 is the worst performance since 1980, when the yellow metal hit $850 an ounce in January only to lose $200 in a matter of days. Image by Nagel Photography  |
| Norman: Wrong to use US rate to judge gold as inflation hedge Posted: 22 Dec 2013 01:34 PM PST Ross Norman, ex-trader for NM Rothschild and Credit Suisse and owner of bullion brokers Sharps Pixley, tells Dukascopy TV, that gold's taper-triggered fall last week was relatively modest and mostly attributable to the strengthening of the US dollar. "Gold was actually a bit of a sideshow," said Norman adding that the subdued reaction of the gold price despite record number of shorts – bets that the price will fall – was a cause for optimism and that "all the bad news may now already be in the price." Norman said while long-term inflation is an important driver for the gold price, it is wrong to focus just on US inflation, which is sitting near decade lows of 1.2%: "Before the financial crisis India and China accounted for 46% of global demand for gold. Today its is over 80%. It is the inflation in those demand centres that really matter. Attempt to stimulate economies in the West often lead to inflation in those countries, where much of the goods bought in the West is manufactured. India's inflation is running at 7.5% and China's at close to 3.5%, and demand from these economies will continue grow in future." Norman made the case in April that the dramatic $200 an ounce drop in the gold price over two sessions was sparked by a short seller's 'shock & awe' 400 tonne trade. Last month a Sharps Pixley study detailed how attempts by the government of India, the world's number one consumer of the yellow metal, to curb the nation's appetite for gold backfired. London-based Sharps Pixley was founded in 1778, and the bullion dealer was one of the original members of the London Gold Fix. German bullion retailer Degussa Goldhandel earlier this year bought the storied firm. |
| Codelco's Chuquicamata copper mine strike over Posted: 22 Dec 2013 11:58 AM PST Workers at Chuquicamata, Chile's Corporacion del Cobre or Codelco flagship copper mine, have returned to work after a 17-day strike. Fox News Latino reports the 800 workers turned up for duties on Saturday after management agreed to pay hikes and more hiring. Over 20,000 tonnes of copper concentrate were not refined, but no other operations at the mine were affected by the labour action. Chuquicamata, which is located 1,650 km north of the Chilean capital of Santiago, is the largest open pit copper mine in the world. It started operations in 1910 and forms the core of Codelco's Chuquicamata division, which also includes a second open pit mine, Mina Sur. State-owned Codelco's copper output has slumped in recent years as reserves are depleted and its biggest mines Chuquicamata and Radomiro Tomic struggle with falling grades and soaring costs. Chuquicamata has only ten more productive years left and Codelco is spending $4.2 billion to extend the mine into an underground operation, with a projected output rate of 140,000 tonnes per day. It is expected to start production in 2018. Apart from Chuquicamata extension Codelco's other massive project is Andina 244, a $6.8 billion expansion of the current Andina mine high in the Andes mine with target date for completion is 2020. Codelco is responsible for 10% of the global supply of the red metal and the South American nation depends on the copper industry for almost a third of total revenues and 45% of export earnings. |
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