Hinde Gold, a gold-focused hedge fund, reduced its gold positions on Thursday night in anticipation of a sell-off in the price of bullion, the fund’s director Ben Davies told FT Alphaville.
Gold had at one stage dropped as much as 5 per cent as it responded to safe haven flows into the dollar. The precious metal has since recovered to trade about 3 per cent lower at $1,155.80.
Commenting on the sell-off, Davies — who had moved his fund to its maximum 50 per cent under weight gold position — said:
“It happened so quickly, I’ve never seen a quicker paper liquidation in gold ever.”
According to Davies, it was clear gold had become massively overbought by Thursday afternoon. However, he noted the fund – which also invests in gold-related equity stocks — was still bullish on the yellow metal further down the line. As he told FT Alphaville:
In the short-term this is potentially a significant top. Our whole game plan for the season was that we were going to see a liquidity surge that would take us to new highs come mid January. But we needed an end of November correction to get us there.
That sentiment, meanwhile, was echoed by Danske Bank analysts on Friday, who wrote:
Gold has retreated following the rebound of the dollar, thus leaving USD1,200 untouched this time around. Momentum in bullion remains strong however with increasing speculation that central banks could get into a ‘bidding war’. The gold risk reversal, i.e. the market view of the most likely direction of the spot movement over the next maturity data, has increased a little during the autumn but not massively so, suggesting that market pricing has not quite anticipated the surge witnessed of late.
Related links:
Gold stocks pricing in $940/oz long-term gold price – FT Alphaville
IMF sells 200 tonnes of gold to India central bank - FT