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Dovish Fed Prompts Hedge Funds To Buy Gold – Analysts - Kitco

Dovish Fed Prompts Hedge Funds To Buy Gold – Analysts - Kitco

Release Date:  Friday, December 8, 2017

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Dovish Fed Prompts Hedge Funds To Buy Gold – Analysts - Kitco
Commodity Futures Trading Commission trade data showed hedge funds bought gold last week at the fastest pace in four months. According to the report, net bullish speculative positioning is at its highest level in 10 weeks.

“Bart Melek, head of commodity strategy at TD Securities, said that hedge funds started to buy gold again after the release of dovish minutes from the last Federal Reserve monetary policy meeting. During the meeting, some committee participants raised concerns about weak inflation pressures and even said that further rate hikes should be put on hold in the current low inflation environment.

“’The return of a low inflation narrative, as the minutes revealed many policymakers are concerned that inflation may remain weak for longer than expected, prompted dollar weakness and a flattening of the yield curve,’ said Melek. ‘This saw the opportunity and carry costs of holding the zero-yielding assets reduced, leading to increased interest in the yellow metal.’

“Looking ahead, Melek added that he expects to see gold well supported in the near term as hedge funds look for safe-haven investments to protect against escalating geopolitical risks and ongoing drama in Washington D.C.

“However, not all analysts are optimistic on gold. Ole Hansen, head of commodity strategy at Saxo Bank, noted the massive one-sided positioning in the marketplace.

“’The combination of longs being added and the shorts were reduced helped drive the long-to-short ratio to an uncomfortable high of 21.4 to 1,’ he said. ‘A market this skewed towards higher prices was last seen five years ago.’” (“Dovish Fed Prompts Hedge Funds To Buy Gold - Analysts.” Kitco 12.04.17)

Gold Rally Expected By End Of December – Peter Hug - Kitco
Kitco’s global trading director, Peter Hug, says that the market is “extremely nervous” as the end of the year approaches.

“’This market is extremely nervous… From an investors’ perspective, this is absolutely the time you need to hold insurance,’ Hug told Kitco News on Friday, saying that any slight movement in the political sphere can have massive repercussions on the stock market.

“Gold’s price pattern during the last month of the year will likely resemble that of December 2016, Hug added.

“’The charts look similar to 2016 in December, where the first part of the month looks like it might be weaker and then rally through December back into January. We might see a similar pattern reappear this cycle,’ he said.

“’The December rate hike is in the market, it has been in the market for a while,’ Hug said. ‘Some analysts indicated that the Fed may [raise rates] three or four times next year. I just don’t see it in the cards, unless there is some really significant uptick in growth in the U.S. economy and we start getting more fiscal stimulus out of Trump administration.’ (“Gold Rally Expected By End Of December – Peter Hug.” Kitco 12.03.17)