Hedge funds are betting on a big commodity price rebound after a dismal second quarter, with trade data showing bets for higher prices at a near six-month peak after the U.S. Federal Reserve softened its stance on tapering its monetary stimulus.
Wagers on U.S. crude oil are already at record highs, the weekly data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.
Bets are also growing for a rebound in gold after its price tumbled 23 percent in the second quarter.
Fed Chairman Ben Bernanke, addressing Congress over two days this week, said the central bank's stimulus-tapering plans were not set in stone and depended on the strength of the economy. He had previously signaled that the Fed's $85 billion in monthly bond purchases would be scaled back later this year and ended altogether in 2014.
The Fed's ultra-loose monetary policy has retained pressure on long-term U.S. interest rates. Its three-year long stimulus program has added to fears of inflation, stoking prices of commodities, including oil and gold.
"Ever since Bernanke did a 180 degree turn and completely reversed talk of tapering, we've seen a big rush into risk assets," said Adam Sarhan, founder of New York-based financial advisory Sarhan Capital. "That explains why hedge funds are chasing commodities again."
Reuters calculations of data released by the CFTC showed hedge funds and other money managers raising to $76.4 billion their net long or bullish positions across 24 commodity markets tracked by the agency in the week to July 16.
The previous high for such so-called managed money net longs was during the week to Feb. 5, when more than $80 billion was at stake. In actual contract terms, the net long position grew nearly 16 percent to reach 903,227 contracts.
That amounted to a change of $11.3 billion on the week, according to Reuters calculations, the most those markets had seen in a week since August 2012.
Commodity prices tumbled in the second quarter. The Thomson Reuters-Jefferies CRB index, a key indicator for the sector tracking 19 commodities, fell 7 percent for its sharpest quarterly decline in a year. Quarter-to-date, it is up nearly 6 percent, reflecting this month's strong rebound in prices.
Money managers' bets for a rise in U.S. crude oil prices reached all-time highs during the week to July 16, eclipsing a record set during Libya's civil war in 2011, the CFTC data showed. Futures of U.S. crude traded on the New York Mercantile Exchange witnessed a net rise of $2.4 billion in managed money during the week, Reuters calculations showed.
The front-month contract for U.S. crude hit a 16-month high of $109.32 a barrel on Friday and settled at $108.05, up 2.2 percent for the week. For the first time in 33 months, U.S. crude is at near parity to Brent, the global benchmark oil, as signs of strong demand from U.S. refiners encouraged spread trading between the two crude grades. Brent traded at a premium of more than $20 a barrel back in February.
Speculators also raised their net long position in U.S. gold futures for a third straight week, adding 19,844 lots to reach a total of 55,535 contracts. Gold futures on New York's Comex saw a net surge of $2.6 billion in managed money bets during the week to July 16. Comex's most-active gold futures contract, August, settled at $1,292.90 an ounce on Friday, up 1.3 percent for the week. It was the second weekly gain for the market, which is up 6 percent so far in July for its best monthly performance since a 10 percent surge in January 2012.
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