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Hedge Funds Continue to Increase Au Bets

Hedge funds increased wagers on a gold rally to the highest in seven weeks before a report showing the U.S. added more jobs than forecast spurred the biggest retreat in prices since April.

Speculators raised their net-long position by 19 percent to 57,113 futures and options by June 4, U.S. Commodity Futures Trading Commission data show. The holdings surged 60 percent in two weeks, the most since March, as short bets contracted. Net-bullish wagers across 18 U.S.-traded commodities slid 3.3 percent as investors became more bearish on sugar and coffee.

U.S. payrolls rose 175,000 in May, signaling companies are optimistic about the outlook for demand, the government said June 7. The report increased speculation the Federal Reservewill taper its bond buying. Gold holdings in exchange-traded products dropped 19 percent to a two-year low since the start of January as some investors lost faith in the metal as a store of value and as equities rose and inflation failed to accelerate.

“We saw some short-term bullish sentiment build up, then the jobs data dashed all hopes of gold rising,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “Any good news for the economy is not so good for gold. The debate about when the Fed will taper or end stimulus continues to pressure.”

Biggest Loss

Gold futures dropped 2.3 percent on June 7, the most since April 15, when the metal capped a two-day, 13 percent loss that was the biggest in three decades and sent prices into a bear market. Bullion rose 1.6 percent in the four days prior to the jobs report, before ending the week down 0.7 percent at $1,383 an ounce. Gold futures traded at $1,379.90 an ounce by 6:47 a.m. in New York today, 28 percent below the record reached in September 2011….”

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