Hedge funds ditch gold, blame it on Janet Yellen

By Joe Deaux
Hedge funds decided to take a breather from gold just before Janet Yellen gave investors more reason to ditch the precious metal.

After a roaring start to the year, the excitement over bullion has dissipated this month on increasing expectations that the Federal Reserve is getting ready to raise US interest rates again as the economy improves.

Last week, money managers who have been bullish since January reduced their wagers on a price rally by the most this year.

Fed Chair Yellen, in a speech on Friday, threw her support behind a growing consensus at the central bank in favour of another interestrate increase soon.

Higher rates hurt gold because the metal becomes less competitive against interest-bearing assets. Rising borrowing costs also tend to strengthen the dollar, which makes bullion less appealing as an alternative.

“Some of that momentum-chasing for gold has come off,” Josh Crumb, who helps oversee $1.7 billion at Torontobased GoldMoney, said.