BofAML: Hedge Funds Sell Gold at Record Pace

Nov 9 2015 | 7:39pm ET

Hedge fund managers sold gold contracts during the week ended November 4 by the most since Bank of America Merrill Lynch began tracking their movements in 2006, according to the last edition of the bank’s Hedge Fund Monitor.

Elsewhere, large speculators also sold the most 10-year Treasury contracts since March 2013 during the week. Both moves were attributed to comments made by the U.S. Federal Reserve suggesting a December interest rate hike was likely.

BofAML’s investable Hedge Fund Composite index was up 0.19% for the period and stands up 1.58% QTD as of Nov. 4. Most hedge fund strategies were up slightly, but CTA Advisors and Market Neutral were hit hard, losing -1.37% and -0.65%, respectively. Leading the pack so far this quarter is Event Driven, up 2.32%, although the category remains down -4.20% year-to-date. Merger Arbitrage remains in the top spot so far this year, up 6.98%.

In equities, BofAML noted that hedge funds bought the NASDAQ 100 for the fifth consecutive week, and have continuously accumulated the most contracts since Aug. 2013.

BofAML’s models suggest Market Neutral funds market exposure increased to 1% net long from 3% net short. Meanwhile, Equity Long/Short market exposure remained at 30% net long, below the 35-40% benchmark. Macro funds notably reduced their short positioning in Commodities, while reducing shorts in the S&P 500 & Treasury contracts. In addition, Macros reduced their long positioning in USD and NASDAQ 100, while decreasing their shorts in EM and EAFE.

CFTC data for the week reveals significant hedge fund moves across asset classes. In equities, hedge funds increased their shorts in S&P 500 and Russell 2000, and as mentioned, bought NASDAQ 100 for the 5th consecutive week. 

In agriculture, large speculators reduced their shorts in Wheat, slightly decreased their long in Corn, and slashed their long in Soybean.

In metals, they notably sold their long in Gold, reduced their long in Silver and Palladium; held steady their long in Platinum; and increased their short in Copper. Gold may rally tactically, but remains vulnerable on sizable longs by large speculators, wrote BofAML.

In Energy, hedge funds increased their long positioning in WTI crude and Gasoline, while increasing their shorts in Natural Gas and Heating Oil.

In FX, they notably increased their short positioning in Euro and JPY, increased their shorts in AUD, reduced their long in GBP to almost flat, and maintained a flat positioning in MXN.

In interest rates, large specs sold the most 10-yr Treasury contract in a single week since March 2013 as a move by the Fed is seen as increasingly imminent. They also increased their short in 30-yr, and sold 2-yr to a net short.


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