Gold Analysts Most Bearish Since June on Fed Taper: CommoditiesNicholas Larkin
Gold analysts are the most bearish since June as the Federal Reserve signaled it may ease stimulus “in coming months” as the economy expands, cooling demand for an investment haven.
Nineteen analysts surveyed by Bloomberg News expect prices to drop next week, nine are bullish and three neutral, the largest proportion of bears since June 21. Gold has fallen to a four-month low and the dollar strengthened after Fed minutes released Nov. 20 showed U.S. policy makers expected enough improvement in labor markets to warrant slower debt purchases.
The metal is heading for its first annual drop in 13 years as some investors lost faith in gold as a store of value, fueled by concern that reductions in $85 billion of monthly Fed bond buying will ease the risk of accelerating inflation. U.S. unemployment-benefit applications fell to the lowest in two months and October retail sales jumped the most since July, the government said this week. Standard Bank Group Ltd. advised selling gold on rallies amid weaker physical demand in Asia.
“For safe-haven assets, there’s no point because the economy is recovering,” said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia’s second-largest lender. “The dollar should remain strong, and that’s what should cap any upside in gold anyway. Consumer demand is slowing down. It will recover, but not at the moment.”
Bullion slumped 26 percent this year to $1,243.63 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.4 percent since the end of December, while the MSCI All-Country World Index of equities gained 18 percent. The Bloomberg U.S. Treasury Bond Index lost 2.6 percent.
Investors sold 773.9 metric tons from gold-backed exchange-traded products this year through Nov. 20, erasing $67.5 billion from the value of the funds and pushing holdings to the lowest since April 2010, data compiled by Bloomberg show. This year’s sales almost match total purchases in the previous three years.
Billionaire hedge-fund manager John Paulson, the largest holder in the SPDR Gold Trust, the world’s biggest ETP, told clients Nov. 20 that he wouldn’t personally invest more money in his gold fund because it isn’t clear when inflation will accelerate, according to a person familiar with the matter.
Paulson has lost 63 percent this year in the PFR Gold Fund, said the person, who was briefed on the returns and asked not to be identified because the information is private. The fund, which has shrunk to $370 million, with most of that John Paulson’s own money, fell 1.2 percent in October, the person said.
The Bloomberg U.S. Dollar Index, a measure against 10 major currencies, has rallied 2.1 percent since touching an eight-month low on Oct. 23. The gauge reached the highest since Nov. 12 yesterday, a day after minutes of the Fed’s Oct. 29-30 meeting showed policy makers “generally expected” improvement in employment data that would “warrant trimming the pace of purchases in coming months.”
Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system. As of Nov. 19, four of five investors, traders and analysts who are Bloomberg subscribers expected the Fed to start reducing its monthly bond buying in March or later, with 5 percent looking for a move next month, the Bloomberg Global Poll found.
Economists’ expectations for less stimulus have already been pushed back after the central bank unexpectedly maintained its program at its Sept. 17-18 meeting. Gold climbed as much as 2.6 percent last week after Fed Vice Chairman Janet Yellen, nominated by President Barack Obama to succeed Chairman Ben S. Bernanke, whose term expires Jan. 31, said the economy and labor market must improve before bond buying is reduced.
Bullion, which slid 35 percent from its record set in September 2011, is trading about 5.3 percent above a 34-month low of $1,180.50 set on June 28. The metal rallied as much as 21 percent in the following two months as lower prices boosted purchases of jewelry, coins and bars, particularly in Asia. China and India are the biggest consumers of the metal.
Global demand for jewelry, bars and coins increased 20 percent to 3,757.1 tons in the 12 months through September, the London-based World Gold Council said in a report last week. Usage in China jumped 30 percent in the period and puts it on pace to overtake India as the biggest consumer. Indian buying rose at a slower rate of 24 percent as the government imposes import restrictions on gold to curb its current-account deficit.
Prices that are heading for the third weekly decline in four pushed gold’s relative-strength index to 30 yesterday, a level that suggests to some analysts using technical charts that the price may be set to rebound.
The metal will fall to $1,200 at the end of this year, ABN Amro Group NV forecasts, and Goldman Sachs Group Inc. sees prices at $1,110 in 12 months. Credit Suisse Group AG projects an average of $1,180 next year.
Six of 12 people surveyed expect raw sugar to drop next week, five were bullish, and one was neutral. The commodity lost 11 percent this year to 17.4 cents a pound on ICE Futures U.S. in New York.
Seventeen of 27 people surveyed anticipate lower corn prices, with seven saying the grain will rise and three neutral. Those surveyed had the same outlook for soybeans. Thirteen of 25 predicted losses in wheat, with seven bullish and five neutral. Corn fell 39 percent in Chicago this year to $4.2925 a bushel. Soybeans slid 6.4 percent to $13.195 a bushel, as wheat dropped 16 percent to $6.57 a bushel.
Ten traders and analysts surveyed expect copper to climb next week, nine were bearish and seven neutral. Copper for delivery in three months, the London Metal Exchange’s benchmark contract, fell 11 percent this year to $7,095 a ton.
While money printing by central banks helped global equities reach the highest since January 2008 this week, the S&P gauge of raw materials slipped about 8 percent since mid-February. World economic expansion will accelerate to 2.8 percent next year and 3.1 percent in 2015, from 2 percent this year, according to economist estimates compiled by Bloomberg.
“Global growth will pick up, and this should be reflected in rising demand, at least for base metals and to some extent for industrial precious metals,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.
Gold survey results: Bullish: 9 Bearish: 19 Hold: 3 Copper survey results: Bullish: 10 Bearish: 9 Hold: 7 Corn survey results: Bullish: 7 Bearish: 17 Hold: 3 Soybean survey results: Bullish: 7 Bearish: 17 Hold: 3 Wheat survey results: Bullish: 7 Bearish: 13 Hold: 5 Raw sugar survey results: Bullish: 5 Bearish: 6 Hold: 1 White sugar survey results: Bullish: 5 Bearish: 6 Hold: 1 White sugar premium results: Widen: 4 Narrow: 3 Neutral: 2