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Hedge funds raise mining shorts as COVID vaccines seen tamping gold gains

Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains.

An employee takes granules of 99.99 percent pure gold at the Krastsvetmet non-ferrous metals plant
FILE PHOTO: An employee takes granules of 99.99 percent pure gold at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia November 22, 2018. Picture taken November 22, 2018. REUTERS/Ilya Naymushin
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TORONTO: Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains.

Gold prices have dipped from last year's record highs above US$2,000 per ounce as vaccines deployed against the coronavirus encouraged investment in assets that perform well during periods of economic growth.

"While we are by no means out of the woods in our view, the light at the end of the tunnel means that gold markets should begin to see an unwind of the trends that became quite exaggerated over the course of 2020," Royal Bank of Canada analysts said last month.

The bank cut its 2021 forecast for gold to US$1,810 per ounce from US$1,893.

Short trades as a percentage of total traded volume for Barrick Gold rose to 24.8per cent for the second half of last month, from approximately 14.9per cent for the first half of December, according to filings reviewed by Reuters.

Newmont Corp saw an increase to 11.4per cent, from 8.8per cent, over the same period, while trades in Kinross Gold rose to 20.6per cent, from 18.2per cent, according to the data.

Hedge funds typically engage in the practice of short-selling by borrowing a stock from an institutional investor, such as a pension fund, and selling it back at a lower price when shares fall, pocketing the difference.

Tougher lockdown restrictions to combat a new variant of the virus and huge government debt, nonetheless, could propel gold higher.

Short bets against miners Yamana Gold fell to 17.7per cent, from 25.7per cent, while the number for Alamos Gold fell to 19.5per cent from 21.9per cent.

Spot gold rose to its highest in two months on Monday.

"History has always told us to own gold when central banks run out of control," said Joseph Boskovich Sr., chairman and chief investment officer at Old West Investment Management in Los Angeles.

(Reporting by Jeff Lewis and Maiya Keidan; Editing by Dan Grebler)

Source: Reuters