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  Monday, 9 Dec 2013 | 9:58 AM ET

As funds get massively short, gold could spike

AP

Hedge funds and money managers are now less bullish on gold than they've been since June 2007, data from the Commodity Futures Trading Commission show. And that could actually be good news for the beaten-down metal.

"This could set us up for a bit of a run to the upside if we have the catalyst," said Rich Ilczysyzn of iiTrader. "But if we don't get it, then gold could go dormant for a while."

In the week ended Dec. 3, short bets on gold increased by 4,557 to 79,631 lots, and longs slipped slightly to 106,405. That means the net long position in gold fell 16 percent to 26,774 futures and options, which is the smallest net-long position since June 2007.

The interesting corollary to this fact is that from June 2007 to March 2008, gold prices rose by 50 percent.

"I believe that the market's probably too bearish now," said Jim Iuorio of TJM Institutional Services. "And despite the fact that the fundamentals are weighing on gold, market positioning may predict a countertrend rally."

As economic data have improved, many now expect the Federal Reserve to start to bring its quantitative easing program to an end. This is likely to cause interest rates to rise, making non-interest-bearing assets like gold less attractive. Meanwhile, QE has failed to stoke the rampant inflation that many have predicted. Between rising rates and little inflation, investors have largely lost their reasons for owning gold.

(Read more: Here's what was behind gold's wacky jobs reaction)

On the other hand, gold sentiment may have gotten so depressed, and gold positioning so bearish, that the upside now outweighs the downside.

"We've got some large customers that are actually starting to look at this and saying 'I'll buy it here, and put a stop below the yearly low,'" Ilczyszyn said. "The thought now is, 'We might as well just put some on down here.'"

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  Friday, 6 Dec 2013 | 9:58 AM ET

Here's what was behind gold’s wacky jobs reaction

After the Bureau of Labor Statistics announced that 203,000 jobs were added in November, and the unemployment rate fell to 7 percent, gold didn't seem to know what to make of the news. After initially diving to $1,210, the metal quickly added $20 in about 10 minutes, and consequently hit a morning high of $1,245 at 9:03 a.m EST before cooling off.

Traders said that rather than representing a disagreement on what the better-than-expected jobs number will ultimately mean for gold, the action can mostly be pegged on a lack of liquidity.

»Read more
  Thursday, 5 Dec 2013 | 4:40 PM ET

Is QE behind the rally? Siegel and Wien debate

Jeremy Siegel debates Byron Wien
Jeremy Siegel debates Byron Wien   

Byron Wien and Jeremy Siegel both say stocks are headed higher. But while Wien says that the Federal Reserve's quantitative easing policies have been a big part of the market's bull run, Siegel believes that the effect of the Fed has been badly overstated.

"I think a large part of the appreciation in the market this year is a result of Federal Reserve monetary accommodation," said Wien, the vice chair of Blackstone Advisory Partners. "That's what drove the market. It drove stock prices higher, and it kept interest rates low."

(Read more: Byron Wien: Why I've become bullish on the market)

But Siegel, professor of finance at the Wharton School and one of the best-known market bulls, takes issue with that characterization.

"I have to disagree with you here," Siegel directly told Wien on Thursday's episode of "Futures Now." "I think that one of the biggest myths on Wall Street is that it's QE that's driving the market."

"I'm looking at the earnings and the interest rate and saying, 'I can certainly justify these prices without having to resort to QE,' " Siegel continued.

(Read more: You're wrong—QE has not boosted stocks: McKinsey)

Because he doesn't think the Fed's $85 billion-per-month bond-buying program has been the main driver behind stocks, he doesn't think that a reduction, or tapering, of that program will have a traumatic impact on the market.

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  Thursday, 5 Dec 2013 | 1:54 PM ET

Byron Wien: Why I’ve become bullish on the market

Byron Wien: Why I got stocks and gold wrong this year
Byron Wien: Why I got stocks and gold wrong this year   

Byron Wien is changing his tune. In January, he predicted that 2013 would be a tough year for stocks—but now he says that the market has further to run.

"If the economy keeps on growing at a 2 percent or better rate, if earnings do improve, maybe even being disappointing but still improving, and if valuations aren't excessive—and they're not—stocks can go higher next year," Wien, the vice chairman of Blackstone Advisory Partners, said on Thursday's "Futures Now."

This is in stark contrast to his call for what the market would do this year. In his famed series of yearly predictions, Wien said that 2013 would be a tough year for the market.

"A profit margin squeeze and limited revenue growth cause 2013 earnings for the Standard & Poor's 500 to decline before $100, disappointing investors," Wien predicted in early January. "The S&P 500 trades below 1,300."

(Read more: BlackRock bond guru: Now I prefer stocks to bonds)

Wien says that he got part of that call mostly right.

"While the S&P is going to earn probably $105, earnings were disappointing this year," Wien maintained. "They didn't expand as much as people thought, even though the economy bumbled along."

»Read more
  Wednesday, 4 Dec 2013 | 2:58 PM ET

Yes, you should buy this dip: Trader

Trader: It's no longer just a Fed-driven rally
Trader: No longer just a Fed-driven rally   

The S&P 500 is down four days in a row, but that's no reason to get scared. I'm buying this dip in stocks, because at this point, it's finally become more than a Fed-driven market. On the whole, economic data are improving, and two data points coming in the next two days should confirm the recent bout of economic strength.

On Friday we get the single most important economic number in the November employment report. ADP said that 215,000 jobs were added by the private sector, which is a good number, and we'll see if the official data agree.

(Read more: Traders await this week's 'hugely critical' number)

Thursday's GDP data are also projected to be strong, with most economists expecting to learn that GDP grew more than 3 percent in the third quarter. That's decent economic growth.

»Read more
  Wednesday, 4 Dec 2013 | 9:53 AM ET

Beware the curse of the new Fed chair?

Janet Yellen
Andrew Harrer | Bloomberg | Getty Images
Janet Yellen

Markets may be excited by the idea of a Federal Reserve led by Janet Yellen, but if history is any indication, stocks could be in for a rough patch as she begins her tenure. Over the past 25 years, a distinct and disturbing trend has emerged—one that has been deemed the "curse of the new Federal Reserve chair."

"Newly installed U.S. central bank heads since 1970 see S&P 500 returns that are, on average, negative over the first three years of their tenure," writes out ConvergEx's chief market strategist, Nicholas Colas, in a Wednesday note. "You could have safely sat out the first three years of Volcker, Greenspan, and Bernanke's respective tenures and made all/even more of the market's return in the remainder of their time on the job."

To be sure, the performance over the start of Chairman Paul Volcker's, Chairman Alan Greenspan's and Chairman Ben Bernanke's terms tells a decidedly gloomy story. On average, the S&P was flat over the first month of the last three Fed chairs' time in office, and dropped about 10 percent in the first three years.


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