Gold and silver plunged unexpectedly today, giving back what was gained during Japan’s first round of fiscal stimulus. The downfall has not ceased apparently and the metals are expected to tumble further. Experts are advising that the bull market on the lustrous precious metals should not rack up their stakes just yet, saying that selling in gold will further drive down the price. However seeing the most recent decline in gold and silver futures, both metals have stepped into their respective buying zones. Last week, as of April 9, hedge fund positions were crowded in the buy zones of both gold and silver, according to data from CFTC.
Gold broke a two year record when price fell below $1400/ounce, a decline of more than 6 percent. SPDR Gold Trust (ETF) (NYSEARCA:GLD) was down over 8 percent today. Silver futures were down over 11 percent already on iShares Silver Trust (ETF) (NYSEARCA:SLV). The decline is the highest since October 2010.
Moving on to what we love the most, short positions of hedge funds in both metals:Petropavlovsk PLC (PINK:PPLKY) (LON:POG) is a short position of Oxford Asset Management and previously UBS O’ Connor in London. The stock has declined over 25 percent today and 60 percent for the year, so big profits for those who had negative exposure here. Petropavlovsk PLC (PINK:PPLKY) (LON:POG) is a gold miner based in Russia.
Take a look at hedge fund short positions in equities here.
We know Argonaut Capital had a short position in gold till February, assuming it hasn’t exited it yet, the recent decline should be adding further to the fund’s profits. Latest information from Omni Macro tells us that the fund added a tactical short in Gold in March but later exited it.
Fresnillo Plc (LON:FRES), a miner of gold, silver and other non-ferrous metals is down 15 percent. Lansdowne Partners is juicing big profits here.
Lonmin Plc (PINK:LNMIY) (LON:LMI), down in excess of 6 percent today, mines a wide array of metals in the platinum-group including gold and silver. The short position in Lonmin Plc (PINK:LNMIY) (LON:LMI) is held by funds like Odey Asset Management, Bocage Capital and several others.
Vedanta Resources Plc (LON:VED), another miner based in London, is a short position of AQR Capital and BlackRock. Red Rock Resources Plc (LON:RRR), a gold miner with focus in Kenya is a short position of YA Global Master Fund.
In Belgium, Nyrstar NV (EBR:NYR) is a short position of BlackRock and GAM Investment Management. The company is involved in the production of zinc, lead, gold, silver and copper. The shares are down over 5.7 percent today, and -20 percent YTD.
The major factors that have plummeted the prices of these precious metals is a bullish future of US economy, which is good for the markets but bad for safe haven assets as a self-sustaining economy, which means that there would be no further need of fiscal easing. In addition to these headwinds, GDP data from China, largest buyer of gold, showed weaker growth which resulted in further losses for the metals. The debt crisis in Cyprus has also added to the negativity surrounding gold around fears that Cyprus may sell its gold assets to anchor its indebted economy.
The bulls on the precious metals still hold onto the same thesis that the prices will rise eventually as Japan continues with its fiscal easing program and the fundamentals are still in favor of gold and silver. Gold has still outperformed as compared to other market benchmarks like the S&P 500 (INDEXSP:.INX) and favorite equities like Apple Inc. (NASDAQ:AAPL).