Gold traders are the most bullish in a month after mints around the world said demand for bullion coins is surging and central banks added to reserves even as prices slumped the most in three decades.
Fifteen analysts surveyed by Bloomberg expect prices to rise next week, 11 were bearish and three were neutral. Sales of gold coins from the U.S. Mint are poised for the biggest month since December 2009 and the U.K. Mint said purchases tripled in April. Russia and Kazakhstan boosted reserves for a sixth month as stockpiles across central banks climbed to an eight-year high, International Monetary Fund data show.
Gold tumbled into a bear market April 12 and by the end of the following session had retreated 14 percent, the biggest two-day drop since 1983. The slump highlighted some investors’ loss of faith in the world’s traditional store of value, even with nations still engaged in unprecedented money printing. The acceleration in demand for physical bullion since then signals the change isn’t universal.
“Lower prices are bringing back long-term holders,” said Adrian Day, who manages about $160 million of assets as president of Adrian Day Asset Management in Annapolis, Maryland. “All the reasons people were buying gold over the last few years remain intact, particularly the global monetary expansion and currency debasement.”
The metal fell 13 percent to $1, 458.55 an ounce in London this year. Unless it rallies by the end of December, gold will have its first annual decline since 2000, halting the longest winning streak since the end of World War I. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.8 percent since the start of January, the MSCI All-Country World Index of equities rose 7.3 percent and a Bank of America Corp. index shows Treasuries returned 0.6 percent.
The U.S. Mint said April 23 it suspended sales of the smallest gold coins after demand more than doubled. The mint sold 196,500 ounces through April 24, from 62,000 ounces in March, data on its website show. Demand “shows no signs of abating,” Shane Bissett, director of bullion and commemorative coin at the U.K.’s Royal Mint, said April 24.
Standard Chartered Plc said April 23 its physical gold sales to India exceeded the previous record by 20 percent and UBS AG said the same day its flows there are near the highest since 2008. Trading in the Shanghai Gold Exchange’s benchmark contract was more than four times last year’s daily average every day since April 16.
Some central banks probably will take advantage of lower prices, according to the London-based World Gold Council. Russia boosted its holdings, the seventh largest in the world, by 4.7 metric tons to 981.6 tons in March and Kazakhstan’s reserves climbed 1.2 tons, IMF data show. Central banks will buy as much as 550 tons of gold this year after boosting holdings by 534.6 tons last year, the most since 1964, the council estimates.
“The emerging countries’ central banks are quite good timers of the gold market,” said Marcus Grubb, the managing director of investment research at the council. “Although they are looking at the longer-term time horizons, they do look for opportunities to purchase when it’s most favorable.”
There has been an almost doubling of sovereign debt to $22.9 trillion since 2008 as nations from the U.S. to the U.K. to Japan sought to stimulate economies. The IMF cut its 2013 estimate for world growth four consecutive times.
Hedge funds have also got more bullish on gold, raising their bets on higher prices for two consecutive weeks, data from the U.S. Commodity Futures Trading Commission show. Wagers are now the highest in more than a month, reaching 61,579 futures and options by April 16.
Investors in exchange-traded products backed by gold cut holdings by 6.3 percent since the start of April, heading for a record monthly drop by tonnage, data compiled by Bloomberg show. The ETPs own 2,294.5 tons valued at more than $108 billion, from a record 2,632.5 tons in December. Assets in the SPDR Gold Trust, the biggest fund backed by bullion, are the lowest since September 2009.
Goldman Sachs Group Inc. closed its recommendation to sell gold on April 23, while saying bullion may have further to drop. The bank predicts prices will fall to $1,390 in 12 months.
Among other commodities, copper traders were bullish for the first time in five weeks and sugar, soybean and wheat traders were bearish.
Twelve of 22 copper traders anticipate prices will rise next week, five predicted a drop and five were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, slid to the lowest since October 2011 this week and is 11 percent lower since the start of the year.
Fourteen of 31 analysts surveyed expect corn to rise next week, while 13 said the grain will drop. Sixteen traders were bearish on soybeans and nine were bullish. Fourteen predicted falling wheat prices, with 12 expecting a gain. Corn retreated 11 percent on the Chicago Board of Trade this year, soybeans dropped 2 percent and wheat declined 11 percent.
Seven of 11 people surveyed expect raw sugar to weaken, with two bullish and two neutral. Futures fell 11 percent this year on ICE Futures U.S. in New York.
The S&P GSCI gauge of commodities dropped 5 percent since the start of April, heading for the biggest monthly decline since May. Silver, corn, gold and nickel led the retreat.
“To get a big commodity rally you need economic growth expectations to be revised higher,” said Matthew Lehmann, a global strategist at JPMorgan Chase & Co.’s asset allocation team in London. “It is difficult to get really bullish relative to other asset classes when growth expectations are being revised down. That’s a difficult environment for commodities.”
Gold survey results: Bullish: 15 Bearish: 11 Hold: 3 Copper survey results: Bullish: 12 Bearish: 5 Hold: 5 Corn survey results: Bullish: 14 Bearish: 13 Hold: 4 Soybean survey results: Bullish: 9 Bearish: 16 Hold: 7 Wheat survey results: Bullish: 12 Bearish: 14 Hold: 3 Raw sugar survey results: Bullish: 2 Bearish: 7 Hold: 2 White sugar survey results: Bullish: 3 Bearish: 7 Hold: 1 White sugar premium results: Widen: 3 Narrow: 3 Neutral: 5