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Hedge Funds Boost Bullish Bets on Stimulus Outlook: Commodities

(Bloomberg) — Hedge funds raised their bullish commodity bets as mounting speculation that central banks will announce more economic stimulus halted a slide in prices and drove gold to its longest rally since August.

Money managers raised combined net-long positions across 18 U.S. futures and options by 9.1 percent to 587,327 contracts in the week ended June 12, rebounding from the lowest level this year, Commodity Futures Trading Commission data show. Gold holdings rose to a six-week high, while wagers on a rally in silver prices jumped to the highest since the start of May.

More than $1.5 trillion was added to the value of global equity markets in the past two weeks on speculation the Federal Reserve will join central banks in bolstering growth at its policy meeting this week. Commodities rose more than 80 percent from December 2008 to June 2011 as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing and held borrowing costs at a record low. Policymakers from the U.K. to Japan are warning of the threat posed to markets by Europe’s debt crisis.

“The markets are signaling they expect some kind of central monetary easing,” said Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.7 billion of assets. “That tends to bode well for the type of assets that get re-priced very quickly when that happens, and that’s the commodity complex.”

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