Hedge funds cut commodity net longs; gold hit

Date: Tuesday, February 19, 2013
Author: Barani Krishnan, Reuters

(Reuters) - Hedge funds and other big speculators slashed their bullish bets on U.S. commodities, taking aim particularly at gold which had lost some of its lustre this year, trade data released on Friday showed.

Fund managers also exited from corn, coffee and sugar during the week to February 12 as those markets headed south as well, the data from the Commodity Futures Trading Commission suggested.

Gold suffered the largest withdrawals of the so-called "managed money" during the week, from a total of 22 commodities tracked by the CFTC.

Net long contracts of gold traded on the COMEX exchange of New York fell by $2.7 billion, or about 19 percent, in value to $11.6 billion by the close of February 12 from $14.3 billion on February 5, according to Reuters calculations of the CFTC data.

Total net long value for all 22 commodities tracked by the CFTC stood at $81.7 billion, down by $4.4 billion. It was the sharpest weekly drop in net longs since the week to December 25.

The stampede from gold has quickened since February 12, with COMEX's benchmark gold contract tumbling to an August bottom of below $1,600 an ounce on February 15, or Friday's session. In those three days, the contract lost another $40 or nearly 2.5 percent in value.

Since the start of this year, gold has fallen by nearly 4 percent in price.

While it has lost some its shine as a safe-haven asset due to better signs of global economic recovery, gold could also be selling off due to price charts pressuring a downward correction, analysts said.

In Friday's session, gold broke below two support levels -- $1,625 and $1,600 -- prompting automated sell-stop orders set up to prevent deeper losses for those long on the market.

"This is basically technical selling pressure," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management in Oregon, who follows gold and many other commodities.

"We're going into a long weekend and you've got people squaring up positions in what is most likely thin holiday trading," he said, referring to Monday's President's Day holiday in the United States.