Gold Keeps Shining in the Best Rally in Two Months

Published: 2 May, 2016 13:00

Nothing seems to be slowing down the gold market, even when speculators take a step back.

Bullion has been on a tear, with futures last week posting the biggest advance in two months. Hedge funds missed the party, reducing their wagers on a rally by the most since they turned bullish in January.

The money managers were more fortunate when it came to silver, taking their holdings to the highest on record just before the metal had its best monthly advance since 2013.

Biggest Gain in a Decade

The Bloomberg Precious Metals Subindex jumped 23 percent in 2016 amid renewed demand for stores of value. That’s the biggest gain to start a year in a decade. Slowing U.S. growth has underscored why Federal Reserve officials have been cautious about raising interest rates again. The Bank of Japan last week held off on expanding monetary stimulus, a move that surprised economists and added further pressure to the already weakening dollar, boosting the appeal of gold and silver as alternatives.

Huge Issues Support Gold

“Whether it’s the Fed being slightly more dovish and being on hold for some time, or the fact that the BOJ perplexed and surprised markets by doing absolutely nothing when their economy was bumping along at the bottom, those are huge issues that support gold,” said John Stephenson, the Toronto-based chief executive officer of Stephenson & Co. Capital Management, which oversees about C$55 million ($44 million).
He added: “The dollar will remain weaker relative to its major trading partners, and all of that favours gold.”

Gold Holdings

Hedge funds trimmed their net-bullish holdings in gold by 2.1 percent to 184,087 futures and options contracts in the week ending April 26, according to U.S. Commodity Futures Trading Commission data released three days later. The drop reflected some traders cashing in on recent profits, as long wagers fell for the first time in six weeks. Short bets also declined, signalling that investors weren’t getting bearish on the metal.

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