Gold Traders Most Bullish Since July
Gold advanced 17 percent this year to $1,667.70 by 1:07 a.m. in New York, heading for an 11th consecutive annual advance.
Gold advanced 17 percent this year to $1,667.70 by 1:07 a.m. in New York, heading for an 11th consecutive annual advance. Photographer: SeongJoon Cho/Bloomberg.
Gold’s biggest slump in three years means traders and analysts are now the most bullish in three months, speculating that Europe’s debt crisis, slowing growth and a bear market in equities will drive demand for bullion.
Twenty-two of 25 people surveyed by Bloomberg expect the metal to rise next week, the highest proportion since mid-July. Prices rebounded 8.3 percent since reaching a two-month low at the end of September and investors are adding to their holdings in gold-backed exchange-traded products for the first time in a month, according to data compiled by Bloomberg. Traders also expect gains in copper, sugar, corn and soybeans, surveys show.
Gold slumped as much as 20 percent since reaching a record $1,923.70 an ounce on Sept. 6 as investors sold the metal to cover losses in other markets. As much as $4.2 trillion was erased from the value of global equities in the past month on mounting concern that economies will tip back into recession and European lawmakers will fail to prevent sovereign defaults. The last time traders and analysts were this bullish, bullion surged 21 percent to an all-time high within eight weeks.
“There’s macro-economic, systemic and monetary risk in the world and there’s no sign of that going away any time soon,” said Mark O’Byrne, the Dublin-based executive director of GoldCore Ltd., a brokerage handling everything from quarter- ounce British Sovereigns to one-kilogram (2.2-pound) bars. “All the factors that drove gold to a record are still there.”
Bank of America
Gold advanced 17 percent this year to $1,667.70 by 1:07 a.m. in New York, heading for an 11th consecutive annual advance. It’s the third-best performer behind gasoil and Brent crude in the Standard & Poor’s GSCI Index of 24 commodities, which fell 1.2 percent. The MSCI All-Country World Index of equities dropped 10 percent and Treasuries returned 7.7 percent, according to a Bank of America Corp. index.
Bullion dropped 11 percent in September, the most since October 2008. That spurred speculators in U.S. futures to cut their net-long position, or bets on higher prices, to the lowest since February by Oct. 4, according to data from the Commodity Futures Trading Commission. They held a net 127,249 futures and options, 13 percent below the average over the past five years.
Investors reduced their holdings in gold-backed ETPs by almost 17 metric tons last month, data compiled by Bloomberg show. They added 8.7 tons so far this week, taking combined assets to almost 2,219 tons, more than the holdings of all but four central banks.
Accelerating Purchases
Those central banks are also accelerating their purchases. Thailand, Bolivia and Tajikistan bought a combined 18.2 tons in August, International Monetary Fund data show. The slump in prices means more buying for reserves is “very likely,” according to Edel Tully, a London-based analyst at UBS AG. Central banks are adding to their holdings for a third year, the longest expansion in almost four decades.
The traders and analysts surveyed by Bloomberg are also bullish on copper, which entered a bear market last month after slumping more than 20 percent from a peak in July. Seven of nine people expect prices to rise next week. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, dropped 23 percent to $7,392 a ton this year. Copper reached a 14-month low of $6,635 on Oct. 3 as investors speculated that slowing growth will curb demand for raw materials.
China, the world’s biggest copper consumer, imported the most metal in 16 months in September, customs data show. Diego Hernandez, chief executive officer of Codelco, the largest copper producer, said in an interview in London on Oct. 4 that the Asian nation should take advantage of the slump to restock.