Funds bet gravity-defying gold rally has more to run

When it comes to gold, hedge funds are betting that what goes up will continue to go up.

Even after bullion’s best start to a year since at least 1975, investors are positioning themselves for more gains. Money managers increased their wagers on a price rally to the highest since 2012.

The metal has jumped 17% this year. US Federal Reserve officials are cautious about raising interest rates.

Investors are snapping up bullion as the shaky economy picture spurs demand for havens, while low borrowing costs keep the metal competitive against interest-bearing assets.

“There’s a lot of fundamental uncertainty out there, and of course gold has long-term stability,” said John Crumb, chief strategy officer at GoldMoney in Vancouver.

Investors poured $13.6bn (€12bn) this year into exchange-traded products tracking precious metals.

Traders have cut the chance of a US interest-rate rise by December down to about 50%. A weaker dollar boosts the appeal of gold.

Historically, gold prices see some seasonal pressure in late spring and during the summer months, which fall outside of the festival seasons in India and China that boost physical purchases.

The metal could stay in a “consolidation phase” in the next three months that keeps prices near $1,250, said analysts at UBS Group.