17 February 2014 - Hedge Funds Raise Gold Bull Bets as Paulson Holds: Commodities

Posted: 16 Feb 2014 05:50 PM PST

From:http://www.bloomberg.com/news/2014-02-16/hedge-funds-raise-gold-bull-bets-as-paulson-holds-commodities.html

Hedge funds raised bullish gold wagers to a three-month high as signs of slowing U.S. economic growth spurred demand for haven assets. Billionaire John Paulson maintained his bullion holdings last quarter.

The net-long position climbed 17 percent to 69,291 futures and options in the week ended Feb. 11, U.S. Commodity Futures Trading Commission data show. Long wagers rose 8.8 percent, the most since March. Net-bullish holdings across 18 U.S.-traded commodities rose 18 percent to 1.07 million contracts, the highest since October 2012, led by silver and coffee.

Investors' return to bullion after the bear market in 2013 is driving prices to longest rally since 2011. U.S. factory output unexpectedly fell in January and emerging-market equities and currencies weakened. Paulson, the biggest owner of the largest exchange-traded product, left his holdings unchanged in the fourth quarter, a government filing showed. Goldman Sachs Group Inc. and Barclays Plc say the rebound will falter.

"The run-up in prices in recent weeks has been attached to the meltdown in emerging markets, and adding to that concern is U.S. economic news," said John Rutledge, a New York-based chief investment strategist at Safanad, which manages more than $4 billion of assets. "It's still probably too soon to say the trend in gold market has fully turned. You've got people who are bears because they see inflation as under control, and others looking further ahead seeing inflation."

Gold Rally

Futures in New York rose 4.4 percent last week to $1,318.60 an ounce, posting eight straight gains, the best streak since July 2011. The Standard & Poor's GSCI Spot Index of 24 raw materials climbed 0.8 percent, while the MSCI All-Country World index of equities advanced 2.4 percent. The Bloomberg Dollar Spot Index, a gauge against 10 major trading partners, fell 0.6 percent. The Bloomberg Treasury Bond Index lost 0.1 percent.

Holdings in the SPDR Gold Trust, the biggest ETP backed by bullion, climbed for three weeks, the longest stretch since August. Paulson & Co. held 10.23 million shares as of Dec. 31, unchanged from Sept. 30 and valued at about $1.19 billion, according to a U.S. Securities and Exchange Commission filing made Feb. 14.

U.S. retail sales fell in January by the most since June 2012, and jobless claims unexpectedly rose in the week to Feb. 8, government data showed. Federal Reserve Chairman Janet Yellen said on Feb. 11 the recovery in the U.S. labor market is "far from complete." Gold jumped 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system.

Paulson View

Prices plunged 28 percent last year, the most since 1981, after some investors lost faith in the metal as a store of value. In November, Paulson told clients that he personally wouldn't invest more money in his bullion fund because it was unclear when inflation would quicken. Gold held in global ETPs tumbled 33 percent in 2013, and the value of the assets dropped $73 billion.

This year's rally will "flounder" absent a "more meaningful shift" in investor sentiment, Barclays analysts said in Feb. 14 note. Goldman analysts led by Jeffrey Currie, the head of commodities research, said in a report two days earlier that gold will "grind lower" as U.S. growth improves, reiterating a forecast for prices to reach $1,050 by the end of the year.

Fed Taper

The Fed cut monthly bond buying by $10 billion at each of its past two meetings, leaving purchases at $65 billion. Yellen said last week reductions will continue in "measured steps." The U.S. personal consumption expenditures price index, minus food and energy costs, rose 1.2 percent in 2013, matching 2009 as the smallest gain since 1955.

"Gold may be establishing a bottom, but there are still a lot of headwinds," said Donald Selkin, who helps manage about $3 billion as chief market strategist at National Securities Corp. in New York. "Yellen said that the tapering is going to continue, and inflation is still low."

Investors became bullish on silver, holding 7,675 contracts as of Feb. 11, the CFTC data showed. That compares with a net-short position of 353 contracts a week earlier. Futures rose for 10 straight sessions through Feb. 14, the longest streak since March 2008. In January, demand for silver coins sold by the U.S. Mint almost quadrupled.

Crude Bets

Bullish bets on crude oil climbed 11 percent to 306,021 contracts, the highest since August, government data show. West Texas Intermediate advanced to the highest price in almost four months on Feb. 12. Supplies at Cushing, Oklahoma, the delivery point for the futures, shrank to the lowest since Nov. 1, the Energy Information Administration reported the same day.

Speculators expanded their net-bearish position in copper to 15,792 contracts, from 6,832 the previous week. Prices in New York climbed for two weeks, the longest rally this year. Refined imports in China, the world's biggest metals consumer, increased 53 percent in January from a year earlier to a record.

A measure of speculative positions across 11 agricultural products jumped 30 percent to the highest since late October, the CFTC data show. The S&P GSCI Agriculture Index of eight commodities capped a third straight weekly gain, the longest run since August. The measure is rebounding after tumbling 22 percent in 2013, the most since 1981.

Coffee Gains

The net-long position in arabica coffee surged 97 percent to 15,728 contracts, the highest since September 2011. Futures in New York gained 29 percent this year, the most among the 24 commodities tracked by the GSCI. In Brazil, the top producer of coffee, sugar and oranges, the driest January since 1954 drained dams and seared plants.

Investors held a net-long wager in corn of 34,340 contracts. That's the first bullish position since June and compares with a net-short of 5,314 a week earlier.

The net-bearish position in wheat shrank to 43,225 contracts from 52,963 a week earlier. Futures in Chicago climbed 3.2 percent last week, a second straight gain. Farmers in Kansas, the top domestic producer of winter varieties, are "concerned with winterkill" for crops after freezing temperatures, the U.S. Department of Agriculture said Feb. 3.

"Wheat is getting a boost from deep cold in the Midwest," said Ashmead Pringle, the president of Atlanta-based GreenHaven Commodity Services, which oversees about $320 million. Raw materials "have been poor performers in recent years, and should do well in the long-term due to population growth and rising global income. Investors seem to be warming to commodities."

Source:http://www.bloomberg.com/news/2014-02-16/hedge-funds-raise-gold-bull-bets-as-paulson-holds-commodities.html

17 February 2014 - Paulson Kept Gold Stake in Fourth Quarter Amid Price Drop

Posted: 16 Feb 2014 05:47 PM PST

From:http://www.bloomberg.com/news/2014-02-15/paulson-kept-gold-stake-in-fourth-quarter-amid-price-drop.html

Billionaire hedge fund manager John Paulson, who backed away from his bullish bet on gold last year, kept his holdings of the metal unchanged in the fourth quarter as prices capped the biggest annual drop since 1981.

Paulson & Co., the largest investor in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, held 10.23 million shares as of Dec. 31, unchanged from Sept. 30, a government filing showed yesterday. Paulson & Co., which manages about $21 billion, has kept its stake intact since cutting by half in the three months ended June 30.

Gold tumbled 28 percent last year as equities surged and inflation remained muted. Paulson, 58, started his foray into gold in early 2009, betting that prices would rise amid unprecedented monetary stimulus. His tone changed last year, telling clients in November that he personally wouldn't invest more money in his bullion fund. While prices have rebounded 9.7 percent this year, they're still 31 percent below the record $1,923.70 an ounce reached in September 2011.

"The equity market was the start performer, and we saw most momentum players ditch gold," said Jeff Sica, who helps oversee more than $1 billion of assets as president of Sica Wealth Management in Morristown, New Jersey. "While this year we have seen some repair in prices, people need to see a meaningful increase for the tide to change."

In the three months ended Dec. 31, gold prices fell 9.4 percent, helping to wipe $14.1 billion from the value of global ETPs backed by bullion as investors reduced their holdings by 166.4 metric tons, a fourth straight quarterly decline. Billionaire George Soros sold his entire stake in the SPDR Gold Trust in the second quarter, according to a government filing.

Mining Companies

The drop in prices took its toll on mining companies. Barrick Gold Corp., the world's largest producer, took $2.82 billion of writedowns in the fourth quarter, bringing the total in 2013 to $11.5 billion. Goldcorp Inc., the second-largest, reported $443 million of impairments. The Market Vectors Gold Miners ETF fell 16 percent in the three month ended Dec. 31.

Paulson maintained his stake in Agnico Eagle Mines Ltd. and cut his stake in AngloGold Ashanti Ltd.'s American depositary receipts, the filing shows. Soros Fund Management LLC acquired 6.3 million shares of Barrick in the fourth quarter, according to a separate filing.

Armel Leslie, a spokesman for Paulson & Co. who works for WalekPeppercomm, declined to comment on the filing. Michael Vachon, a spokesman for Soros, declined to comment on the firm's holdings.

Asia Demand

Prices reached a six-month low in December, increasing demand for coins, bars and jewelry, mostly in China and India. Sales of American Eagle gold coins by the U.S. Mint rose 63 percent in January to the highest since April. Futures in New York climbed for eight straight days through yesterday, the longest stretch of gains since July 2011.

Gold's rally has been driven in part by "very, very strong" physical demand, Greg Robinson, chief executive officer of Newcrest Mining Ltd., Australia's biggest producer, said yesterday on a media call. Barrick CEO Jamie Sokalsky said Feb. 13 he is more optimistic prices have bottomed amid reports of Chinese demand and slowing ETP sales.

Holdings in the SPDR Gold Trust rose to 806.35 tons as of Feb. 13, the highest since Dec. 20, before dropping 0.6 percent to 801.25 tons yesterday. Investors have returned to the metal amid signs of sputtering U.S. economic growth. Domestic retail sales fell in January by the most since June 2012, and jobless claims unexpectedly rose last week, government data showed. Federal Reserve Chairman Janet Yellen said on Feb. 11 that the recovery in the labor market is "far from complete."

Debt Purchases

Gold surged more than 500 percent during 12 straight years of gains through 2012 as the dollar weakened. The rally accelerated from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases and held borrowing costs at a record low to revive growth amid a U.S. recession.

This year's rebound hasn't deterred analysts at Goldman Sachs Group Inc., who on Feb. 12 restated a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth. Barclays Plc sees prices averaging $1,150 in the second quarter and expects the rally to "flounder," the bank said in a report yesterday.

The Fed cut monthly bond buying by $10 billion at each of its past two meetings, leaving purchases at $65 billion. Yellen said Feb. 11 that cuts aren't on a "pre-set course."

"The long-term players will hold on to their gold, as such kind of money printing will lead to inflationary pressure in the long run," said John Kinsey, who helps manage about C$1 billion ($935 million) at Caldwell Securities Ltd. in Toronto. "In the short term, we cannot expect prices to surge as the investment demand is still low."

Source:http://www.bloomberg.com/news/2014-02-15/paulson-kept-gold-stake-in-fourth-quarter-amid-price-drop.html

17 February 2014 - Hedge Funds Raise Gold Bull Bets as Paulson Holds: Commodities

17 February 2014 - Hedge Funds Raise Gold Bull Bets as Paulson Holds: Commodities

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