Hedge fund commodity bets fall by most since March as gold drops

NEW YORK Fri Nov 15, 2013 6:39pm EST

NEW YORK (Reuters) - Hedge funds and other speculators pulled money out of gold for a third straight week to reduce bullish bets they had staked on U.S. commodities. The size of the reductions was the largest in such a period since March, data issued on Friday showed.

The net long money across 22 commodity markets tracked by the U.S. Commodity Futures Trading Commission fell by about $18 billion over a three-week period to around $57.2 billion by the week that ended November 12, CFTC data calculated by Reuters showed.

It was the highest outflow of money from those markets since the three weeks ended March 5, when more than $19 billion exited the space, the data showed.

The CFTC issues trade data on the commodity markets it regulates every Friday. The data is compiled between Wednesday and Tuesday.

Gold dominated the stampede out of commodities in the week to Tuesday, November 12, as hedge funds and other speculative investors sold off more than $4 billion in U.S. futures and options contracts.

Investors have turned bearish toward gold over the past few months on speculation that the Federal Reserve might curtail monetary stimulus that had given the yellow metal some of its strongest gains in the past 3 years.

The spot price of bullion has fallen from a high of nearly $1,700 an ounce this year to below $1,300 now.

The Federal Reserve's incoming chief, Janet Yellen, assured markets this week that the central bank would keep an accommodative monetary policy to help U.S. growth, helping gold recover some of its losses.

But few investors were convinced that Yellen's remarks would staunch further losses in bullion.

"Basically it's just short-covering," said Thomas Vitiello, principal of Aurum Options Strategies, describing the price recovery. He added that the gold market was "not necessarily bullish yet."

The CFTC data showed that hedge funds and other speculators slashed their net long position in U.S. gold by 32,233 contracts, or 37 percent, in the week ended November 12.

For the 22 markets as a whole, net longs fell by 103,405 contracts, or 11 percent, for the week to November 12, and by 384,102, or by nearly 35 percent, since the week ended October 15.

(Reporting By Barani Krishnan; Editing by David Brunnstrom)

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