Adam Sarhan Reuters Quote: Hedge funds plowed into gold even as market looked vulnerable

ReutersFri Apr 19, 2013 6:21pm EDT

* Managed money net longs in gold up nearly 6 pct
* Crude oil, gasoline see big drops; natgas record high
By Barani Krishnan
April 19 (Reuters) – Hedge funds and other big speculators plowed new money into gold even after the precious metal posted a record loss in dollar terms this week, according to trading data on Friday that also showed inflows for many other commodities.
The net long money held by money managers across 22 U.S.-traded commodities rose nearly $950 million, or 6 percent, to $56.5 billion in the week ended April 16, according to Reuters calculations of data released by the Commodity Futures Trading Commission (CFTC).
The data surprised traders and analysts who had been expecting a huge outflow of money from gold and many other commodities this week after prices tumbled across markets on April 15, triggered by global economic worries.
“I think most people would be stunned looking at these numbers, particularly for gold, where there are still so many long even as the market sank like a stone,” said Adam Sarhan, founder of Sarhan Capital in New York.
The net long position in gold futures on New York’s COMEX held by money managers, including hedge funds, rose by 5,495 contracts to 61,579, the CFTC Commitment of Traders data showed.
Open interest in gold, a measure of market liquidity, rose by a staggering 24 percent.
The spot price of gold settled at just above $1,400 an ounce on Friday, down more than 5 percent on the week.
On Monday, or April 15, it fell to below $1,340, losing over 8 percent or more than $125 – its biggest loss in a day in dollar terms. It saw some support later in the week as consumers attracted to the new lower price snapped up gold bars, coins, nuggets and jewelry.
“Gold is rebounding off its low on a pickup in physical demand and short-covering,” said David Meger, director of metals trading at Vision FinancialMarkets.
Despite the rebound, analysts say gold may fall further in the near term as money continues to flow out of exchange-traded funds (ETFs) of the precious metal.
SPDR Gold Trust, the world’s biggest bullion-backed ETF, saw its third-largest weekly net outflow as some $2.2 billion left the fund for the week ended April 17.
Analysts said Federal Reserve policymakers could also suggest reductions in monetary stimulus in the near term, adversely impacting the price of gold.
The only markets that saw significant drops in net long money for the April 16 week were U.S. crude oil and gasoline.
Crude oil on the New York Mercantile Exchange saw a drop of $1.2 billion in managed money net longs, according to Reuters’ calculations of the CFTC data. The market saw a drop of 13,298 net long contracts while open interest rose by 2 percent.
In NYMEX gasoline, net longs also fell by around $1.2 billion or 10,350 contracts.
Net longs in natural gas rose for a ninth straight week to set a new record. The value of the net longs on the InterContinentalExchange rose by around $651 million or 16,411 contracts. Open interest rose by 4 percent. (Editing by Lisa Shumaker)

Adam Sarhan Reuters Quote: Copper extends rally on global stimulus hopes


By Chris Kelly and Harpreet Bhal
NEW YORK/LONDON | Fri Jul 27, 2012 2:39pm EDT

(Reuters) – London copper futures rolled gains into a fourth straight day on Friday, buoyed by growing expectations of further stimulus action from both the U.S. Federal Reserve and the European Central Bank.
Dollar-denominated copper prices received an additional boost from the euro, which rallied to a three-week peak against the greenback after French President Francois Hollande and his German counterpart, Angela Merkel, said they were determined to do all they can to safeguard the euro. <USD/>
Those comments followed a promise by ECB head Mario Draghi on Thursday to do “whatever it takes to preserve the euro.”
“There was a big relief rally after Draghi’s comments calmed the market down by saying the ECB will do whatever it takes for the euro zone, and the market is reassured by that,” said Nic Brown, head of commodity research at Natixis.
London Metal Exchange (LME) three-month copper firmed $98 to close at $7,568 a tonne, off an intra-day peak of $7,584, climbing further away from Wednesday’s one-month low of $7,344.25.
Still, prices of the red metal have slipped about 1.5 percent so far this month.
In New York, the COMEX September contract rose 3.25 cents to settle at $3.4260 per lb, near the upper end of its $3.3790 to $3.4390 session range.
Prices digested and maintained momentum after data showed second-quarter GDP growth in the United States slowed to 1.5 percent, as expected as consumers spent at their slowest pace in a year.
“The U.S. economy is growing, but today’s number was right on the fence between stronger growth and no Fed action, and weaker growth with Fed action,” said Adam Sarhan, chief executive of Sarhan Capital.
“Today’s GDP report is inconclusive … However, when you put this piece of the puzzle with the other pieces in the global economy, it’s still leaning toward further easing.”
Whispers are beginning to grow louder in hopes that the U.S. Federal Reserve will announce a third round of bond purchases, also known as quantitative easing, when it meets next week.
Investors worry that demand from top consumer China, which accounts for 40 percent of global copper demand, has been slow to pick up so far this year, dragging prices 9 percent lower in the second quarter.
But China’s refined copper consumption is forecast to rise by about 5 percent in the second half of 2012 from a year ago, a state-backed research firm said, led by higher demand from power cable makers as the government takes steps to boost the economy.
Still, the open interest in the LME copper contract has dropped to its lowest level in nearly five years, reflecting a lack of conviction about copper’s near term price direction. The latest LME data shows open interest at 233,839 lots, the smallest volume since August 2007.
Analyst Andrey Kryuchenkov at VTB Capital in London expects the rebound in copper and aluminium prices will fade next week in the absence of stimulus measure announcements from central bankers.
“I personally think that copper and aluminium will stall here and probably come back to the July lows simply because I don’t think, and economists also don’t believe, that QE3 is warranted in any way,” he said.
On aluminium, RBC Capital said in a note that price-induced shutdowns by aluminium producers such as Bosnia’s Aluminij Mostar could erode a market surplus forecast for this year, potentially paving the way for a price recovery.
“The analyst community is still working on the numbers, but (such) closures could be enough to seriously erode the previously expected surplus,” it said.
“Add that to the already tight physical market owing to load out queues at LME warehouses and you have a recipe for a decent short-covering rally,” it said in a note.
Bosnia’s top exporter, aluminium smelter Aluminij Mostar, will close 12.5 percent of its smelting capacity due to lower metal prices and higher power costs, and could cut more in September.
The roughly 45 million tonne a year aluminium market is seen in a 500,000 surplus this year, according to a Reuters poll earlier this month.
Benchmark aluminium did not trade at the close, but was last traded at $1,903 a tonne in after-hours business, just shy of its intraday high of $1,904.
(Additional reporting by Eric Onstad in London and Melanie Burton in Singapore; editing by James Jukwey, Keiron Henderson and Marguerita Choy)

Adam Sarhan Reuters Quote: Hedge funds cut commods net longs by $9bln in week

Fri Apr 13, 2012 11:06pm BST
* Sharpest drop in managed money net longs since Dec
* Copper price down 5 pct, open interest over the week
By Barani Krishnan

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April 13 (Reuters) – Hedge funds and other money managers slashed their exposure to U.S. commodities by around $9 billion this week, government data showed o n F riday, in the biggest such cut in four months that came on worries over China‘s slowing economy and fading prospects for new U.S. economic stimulus.
The value of net-long positions held by money managers across 24 U.S. commodity futures markets fell to around $90.7 billion for the week to April 10 from $99.3 billion a week earlier, according to Reuters’ computation of data issued by the Commodity Futures Trading Commission (CFTC).
The copper market took one of the biggest hits for the week, falling 5 percent in both price and open interest, or the number of contracts open for trading.
Speculators also cut their net long positions in U.S. crude oil to the lowest level since December.
The $9 billion drop in net-long values was the sharpest reduction shown by the CFTC’s Commitment of Traders (CoT) data since the week ending Dec. 20, when commodities tumbled on concern about the European debt crisis.
The CoT data is issued every Friday and tracks traders commitments beginning each Wednesday to the Tuesday of the following week. For the week ending this Tuesday, the total number of net-long contracts in the 24 markets held by money managers, including hedge funds, fell by 111,870, or 8.7 percent, to 1,180,535 contracts.
Investors pulled money out of commodities after minutes of the Federal Reserve’s March meeting — released last week — gave dim hope that the U.S. central bank would embark on a QE3, or a new round of government bond buying, that could flood markets with cash.
Concerns over China’s slowing economy added to the selloff. Data on Friday showed gross domestic product in the No.2 economy growing at its slowest rate in nearly three years in the first quarter. China is the biggest importer of base metals and one of the largest consumers of most major raw materials produced by the world.
“While the lack of QE3 and worries about China are enough to keep the long money in commodities on a tight leash, renewed concerns about Europe, particularly Spain’s debt, are making investors more flighty,” said Adam Sarhan, chief executive at New York’s Sarhan Capital.
(Reporting By Barani Krishnan; Editing by David Gregorio)