Gold News: Gold Bulls Raise Bets

Gold News

As Gold prices fall for a second week straight on strong U.S. economic data, Hedge Funds are still increasing their positions on gold, as concerns over the tension between Russia and Ukraine grow.

Money managers reportedly increased their long position by 3.10 percent in the week through July 22 according to U.S. government data.  Only two days later, gold prices dropped to a five-week low among declining demand.  In China, purchases fell by 19% for the first six months of the year.

Despite the 10 percent rally in the first half of the year, Gold futures are headed for a July decline.  While the violence in the Middle East and Ukraine has fueled some buying, signs of U.S. growth have reduced the overall appeal of the precious metal.  As James Shelton, CIO of Kanaly Trust Co. put it, “People bought gold because of fear but once that passes, the premium diminishes.”  Futures are down 1.2 percent since the end of June to 1,305.80 an ounce in New York.

However, some Gold bulls have raised their long position in the past 6 weeks, citing the possibility of inflation, which could revive the metal’s price.  Consumer prices in the US are gradually rising, and while it will not be a radical change in the near term, prices may continue steadily rising over the next few years.

Additionally, the conflict in the Gaza strip has slightly boosted the demand for the metal, as over 800 Palestinians have died and rockets continue to rain down on Israel.  In Eastern Ukraine, the downing of Malaysian Air Flight MH17 has only escalated the struggle between the rebels and the government.  Both of these situations are potential catalysts that could drive the price of Gold up in the upcoming months if they continue to develop.


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