Gold Trade Most Bullish Since March on Syria Crisis: Commodities

Gold traders are the most bullish in five months as mounting concern about military action in Syria drove prices toward bull market territory.

Twenty-three analysts surveyed by Bloomberg expect prices to rise next week, six were bearish and five neutral, the highest proportion of bulls since March 8. Hedge funds and other speculators have the biggest bet on higher prices in six months and holdings of metal in exchange-traded products expanded in the past two weeks, data compiled by Bloomberg show.

Gold, down 27 percent from the record set two years ago after some investors lost faith in the metal as a store of value, advanced 18 percent from a 34-month low in June as lower prices boosted demand for jewelry, bars and coins in Asia. Oil jumped to a two-year high this week as western nations debated their response to an alleged chemical-weapons attack in Syria, increasing concern that higher energy costs will slow economic growth and strengthening gold’s allure as a haven.

“It’s all fueled into the Syria crisis,” said James Moore, an analyst at FastMarkets Ltd. in London. “Oil’s been going up and adds to the inflationary concerns longer down the road and possibly that may feed into concern that high energy prices could derail growth. We’ve seen quite a big slowdown in the liquidation from the hot money that plowed into gold and which has now come out of it.”

Gold’s Rebound

The metal fell 17 percent to $1,394.60 an ounce in London this year. Prices set a three-month high of $1,433.83 on Aug. 28 and a close at $1,440.78 would be a 20 percent gain since June, the common definition of a bull market. It entered a bear market in April. The Standard & Poor’s GSCI gauge of 24 commodities rose 2 percent this year and the MSCI All-Country World Index of equities gained 7.5 percent. Treasuries declined 3.2 percent, the Bloomberg U.S. Treasury Bond Index shows.

The U.S. and the U.K. said Aug. 28 they are prepared to take military action against Syria without authorization from the United Nations Security Council after Russia objected to a resolution granting action to protect civilians. U.S. President Barack Obama said two days ago that while the U.S. has concluded the Syrian government was responsible for a chemical weapons attack against civilians on Aug. 21, he hasn’t decided on a course of action.

U.K. Prime Minister David Cameron failed to win approval from parliament yesterday for a strike against Syria, ruling out military action from one of the U.S.’s closest allies. President Obama is still prepared to proceed even without that U.K. support or an endorsement from the Security Council, the New York Times said, citing unidentified administration officials.

Central Banks

Crude-oil futures surged to $112.24 a barrel in New York on Aug. 28, the highest since May 2011, on concern that the conflict in Syria may spread and threaten oil supplies from the Middle East. While gold slumped this year partly because unprecedented stimulus by central banks failed to accelerate consumer price increases, some investors judge that higher oil prices can stoke inflation and buy the metal as a hedge.

Speculators’ net-long position jumped 29 percent to 73,216 contracts in the week to Aug. 20, the most since Feb. 5, U.S. Commodity Futures Trading Commission data show. Bullion-backed ETP holdings rose 7.7 metric tons from a three-year low on Aug. 8 and August’s sales are set to be the least since the last monthly increase in December.

Biggest Buyer

Consumer buying in India, last year’s biggest buyer, and China pushed global bar and coin sales to a record and jewelry usage to the most since 2008 in the second quarter, according to the London-based World Gold Council. The Austrian Mint’s gold-coin sales rose 79 percent in January to July from a year earlier. BullionVault, a London-based online service for investors to buy and sell physical gold and silver, said new account registrations on Aug. 27 were the most since June 28.

Demand from China, which the World Gold Council says will challenge India to be the top buyer this year, is slowing with prices above $1,400, Standard Bank Group Ltd. said in an Aug. 28 report. The metal for immediate delivery in China averaged about $13 more than the London price so far this month, compared with a premium of $27 in July, Shanghai Gold Exchange data show.

Consumption is already being restricted in India, where the government has sought to curb bullion imports by raising taxes and costs to combat a record current-account deficit. The metal climbed to a record 98,911.2 rupees an ounce this week, making local purchases more expensive. Gold priced in dollars reached an all-time high of $1,921.15 in September 2011.

Buying Debt

Gold rose 70 percent from December 2008 to June 2011 as the Federal Reserve pumped more than $2 trillion into the financial system by buying debt. Policy makers are debating whether the economy is strong enough to allow them to slow monthly purchases of $85 billion. Officials will cut the amount at their next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.

Prices that rose in six of the previous seven weeks pushed gold’s relative-strength index above 70, a level that suggests to some analysts using technical charts that the price may be set to decline. The gauge was at 61.7 today.

Seven of 13 people surveyed expect raw sugar to fall next week and four were bullish. The commodity slid 16 percent to

16.37 cents a pound on ICE Futures U.S. in New York this year.

Fourteen of 26 surveyed anticipate lower corn prices and six said the grain will rise, while 12 of 27 said soybeans will gain and 11 expect lower prices. Eleven predicted losses in wheat and eight were bullish. Corn fell 31 percent to $4.795 a bushel this year in Chicago. Soybeans lost 3.7 percent to $13.57 a bushel, as wheat slid 16 percent to $6.5425 a bushel.

Copper Outlook

Thirteen traders and analysts surveyed expect copper to drop next week, seven were bullish and five neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, fell 10 percent to $7,109 a ton this year.

The S&P gauge of raw materials advanced about 11 percent from a nine-month low on April 18, reaching the highest since February this week. Brent and West Texas Intermediate crude-oil futures and gold account for about 50 percent of the index. An index of the six main metals traded on the LME fell 4.1 percent since reaching a two-month high on Aug. 16

“You would need to see a significant upturn in underlying demand for commodities to sustain a significantly higher price,” said Ross Strachan, a commodities economist at Capital Economics Ltd. in London. “We expect prices to fall significantly for many industrial commodities. There’s very significant supply growth for a number.”

Gold survey results: Bullish: 23 Bearish: 6 Hold: 5
Copper survey results: Bullish: 7 Bearish: 13 Hold: 5
Corn survey results: Bullish: 6 Bearish: 14 Hold: 6
Soybean survey results: Bullish: 12 Bearish: 11 Hold: 4
Wheat survey results: Bullish: 8 Bearish: 11 Hold: 6
Raw sugar survey results: Bullish: 4 Bearish: 7 Hold: 2
White sugar survey results: Bullish: 4 Bearish: 7 Hold: 2
White sugar premium results: Widen: 3 Narrow: 6 Neutral: 4