By Barani Krishnan
Dec 20 (Reuters) – Hedge fund managers cut their bullish bets on gold only modestly this week before the first-ever tapering of the U.S. monetary stimulus sent the precious metal’s price to six-month lows, data released on Friday showed.
They piled into natural gas as the market continued to rally amid freezing weather, the data issued by the Commodity Futures Trading Commission (CFTC) showed.
In gold, for the week ended Dec. 17, hedge funds pared by just $113 million their net-long position on the precious metal that bet on higher prices.
According to Reuters’ calculations, the net long position across 22 key commodity markets tracked by the CFTC stood at $76.3 billion at the close of Dec. 17. The net long value had grown over the past four weeks, rising from $59.2 billion at the close of Nov. 26.
While fund managers had been slashing their net-longs in gold in recent weeks in anticipation of a reduction in the U.S. stimulus, they chose to do the least in the week the Federal Reserve finally acted, the CFTC data showed.
The spot price of gold XAU= tumbled to a six-month low of $1,185.10 on Friday in a delayed reaction to the Fed’s decision on Wednesday to reduce the stimulus.
The central bank decided to taper its monthly asset buying under the stimulus to $75 billion from a previous $85 billion, putting into motion its first step in unwinding the controversial program meant to help the U.S. recovery.
“Any fund manager who didn’t roll back his longs enough and in time before gold’s latest plunge obviously isn’t having a good week,” said Adam Sarhan, president at Sarhan Capital, a New York-based financial advisory.
In natural gas, hedge funds’ new net longs stood at over $4 billion, dominating their bullishness in commodities.
The front-month contract for natural gas on the New York Mercantile Exchange NGc1 rose 1.2 percent in the week to Dec. 17, settling at $4.287 per million British thermal units.
Chilly weather over the last two months has triggered an unexpected surge in U.S. heating demand, putting natural gas at the forefront of the hedge fund play in commodities.
Since Nov. 1, front-month gas futures on NYMEX have spiked some 25 percent, blowing through some key technical resistance along the way.
“We could see more technical buying next week,” said Tom Saal, a natural gas analyst and senior vice president at INTL FCStone in Miami. “The weather moderates for a few days, then turns cold again.”