Judging by the barometer of hedge-fund interest, there's less to get excited about in gold these days.
Even as Greece battled with its creditors to avoid default and keep the euro zone intact, speculators retreated from the metal used as a haven from economic and political upheaval. Money managers cut their net-long wagers by the most in 15 weeks, US government data show.
The strengthening dollar and record valuations for global equities are diminishing bullion's appeal as a store of wealth. As the combined market capitalisation of stocks thundered through $67 trillion last week and the dollar traded at its highest level in at least a decade, this month's losses in exchange-traded products backed by gold reached $4 billion.
"Longer-term, we're still negative on gold," Jack Ablin, the Chicago-based chief investment officer at BMO Private Bank, which oversees about $66 billion, said by phone on February 19. "I view it as insurance. If nothing happens, you should expect to lose money on it. Most of the time, nothing happens. As a risk asset, I think equities are more attractive."
The net-long position in gold tumbled 18 per cent to 110,164 futures and options contracts in the week ended February 17, according to US Commodity Futures Trading Commission data. It was the third consecutive decline, the longest streak since November. Short holdings surged 44 per cent, the most since August.
Futures lost 1.8 per cent last week to $1,204.90 an ounce on the Comex in New York, while the Bloomberg Commodity Index declined 1.7 per cent. The Bloomberg Dollar Spot Index climbed 0.4 per cent. The S&P 500 Index of US equities rose 0.6 per cent and reached a record on February 20.
Given the big drop we've had in the last month, I would certainly be bullish on gold.
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Emergency talks by euro-area finance ministers on Friday led to a provisional deal intended to keep aid flowing to Greece. Even before then, gold had failed to attract much buying, with holdings in global ETPs little changed last week at 1,671.8 metric tons, data compiled by Bloomberg show.
John Paulson, the billionaire hedge fund manager, also is showing less enthusiasm for the metal these days. The investor kept his stake in the world's biggest ETP backed by bullion unchanged for a sixth straight quarter. As of December 31, Paulson & Co owned 10.23 million shares in the SPDR Gold Trust, a government filing showed last week. Each share represents about 0.096 of an ounce.
Gold slumped 29 per cent in the two years through 2014, the first consecutive annual declines since 1998, as equities surged and the US economy gained traction. Futures fell 6.5 per cent in February, heading for the first monthly drop since October.
Minutes from the Federal Reserve's January meeting showed some policy makers argued for keeping interest rates near record lows for longer. The policy makers cited a strengthening dollar, international flash points from Greece to Ukraine and slow wage growth among reasons for delaying the first rate increase since 2006, according to the record released on February 18. Higher borrowing costs cut gold's allure because the metal generally offers returns only through price gains.
"Given the big drop we've had in the last month, I would certainly be bullish on gold," Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland, which oversees about $145 million, said by phone on February 19. "The Fed minutes were extremely positive. The longer the Fed goes on, the more difficult it is for them to raise interest rates, because increasingly, they're waiting for perfect conditions."
Net wagers across 18 US traded commodities rose 15 per cent to 584,669 contracts as of February 17, the first gain this year, CFTC data show. Crude holdings increased for the first time in five weeks before prices capped a weekly loss on expanding US inventories.
A measure of net-long positions across 11 agricultural commodities jumped 45 per cent to 279,963 contracts, the government data show. The Bloomberg Agriculture Index of eight farm products fell 1.5 per cent last week.