Investors Boost Bullish Commodity Bets as Gold Demand Gains
July 18, 2011, 12:23 AM EDTBy Debarati Roy and Yi Tian
(Updates gold record in sixth paragraph.)
July 18 (Bloomberg) -- Funds boosted bets on rising commodity prices by the most in almost a year as traders snapped up gold amid escalating debt woes in the U.S. and Europe.
Speculators raised their net-long positions in 18 commodities by 15 percent to 1.09 million futures and options contracts in the week ended July 12, government data compiled by Bloomberg show. That’s the biggest gain since early August. Gold holdings surged the most since September 2009 as prices climbed to a record last week. A measure of bullish agriculture bets climbed the most in 11 months.
The Standard & Poor’s GSCI Spot Index increased for a third straight week, climbing to a one-month high on July 13. Gold futures climbed for nine straight sessions to Friday, the longest rally since November 2009, on increasing demand for the precious metal as a haven.
“People have been thinking about where to invest when you are dealing with a situation of high debt in both Europe and the U.S.,” John Stephenson, who helps manage $2.6 billion at First Asset Management Inc., said by telephone from Toronto. “People know there is tangible value for metals and commodities. There is a store of value in these products.”
Investors poured $5.5 billion into commodity funds in the week ended July 13, the biggest inflow since April 6, according to EPFR Global, a Cambridge, Massachusetts-based researcher. Ten of the top 11 funds getting inflows were gold funds, EPFR said.
U.S. Rating
Last week, Standard & Poor’s became the second rating company to say it may cut the U.S.’s top credit grade, and the Federal Reserve said it would consider a third round of so- called quantitative easing if the economy falters. Gold futures climbed to a record $1,599.20 an ounce on the Comex today.
“There was a lot of fear in the marketplace about a potential downgrade of U.S. debt and more negative news from the euro zone,” said Brad Durham, an EPFR managing director, said in a telephone interview on July 15. “It was a good, old- fashioned flight-to-safety trade.”
Hedge funds and other money managers lifted their net-long gold position by 44,393 futures and options contracts, or 25 percent, to 222,184, data from the U.S. Commodity Futures Trading Commissioned showed. That was the biggest jump since the week ended Sept. 8, 2009.
Speculators raised their net-long position in 11 U.S. farm goods by 16 percent to 655,798 contracts as of July 12, the biggest increase since August.
Holdings of soybeans surged 40 percent, the most in a year. Prices of the oilseed climbed for 10 straight sessions, the longest rally since September 2007, as hot, dry weather threatened crops in the U.S., the world’s leading exporter.
--Editors: Millie Munshi, Patrick McKiernan
To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Yi Tian in New York at ytian8@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
