Gold Traders More Bullish After Bear Market Averted
Bloomberg
Gold traders are the most bullish in a month as Europe’s deepening debt crisis and increasing tensions over Iran drove the metal to its longest winning streak since October.
Ten of 22 surveyed by Bloomberg expect the metal to gain next week and five were neutral, the highest proportion since Dec. 9. The U.S. Mint sold 45,500 ounces of American Eagle gold coins this month, compared with 65,500 ounces in the whole of December and 41,000 in November, data on its website showed.
Britain and France will press the European Union to stop Iranian crude imports at a Jan. 30 meeting, in response to the country’s nuclear program. Iran is threatening to retaliate by blocking the Strait of Hormuz, a key chokepoint for global oil supplies. Greek Prime MinisterLucas Papademos warned his nation may face economic collapse as soon as March. Investors are holding (.GLDTONS) a near-record amount of gold through exchange-traded products after the metal rose for an 11th consecutive year.
“European sovereign-debt risk and the geopolitical risk of the Iranian situation escalating should support gold,” said Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. “Gold’s safe-haven attributes will continue to be in demand.”
Annual Gain
Bullion rose 10 percent last year, beating the 1.2 percent decline in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 9.4 percent retreat in the MSCI All-Country World Index of equities. Treasuries returned 9.8 percent last year, a Bank of America Corp. index shows.
The metal, which traded at $1,618.28 an ounce at 5:45 p.m. in London, fell almost 19 percent from its record closing price of $1,900.23 on Sept. 5 through Dec. 29, within 1 percentage point of the common definition of a bear market. Gold rallied 5 percent in five days ended yesterday, the longest run of gains since October.
Traders also anticipate advances in raw sugar, corn and soybeans next week. Copper may decline, the surveys showed.
Holdings in bullion-backed ETPS reached 2,355.3 metric tons on Jan. 4, within 2 percent of the all-time high set Dec. 13, data compiled by Bloomberg show. The hoard, valued at $121.7 billion, exceeds the reserves of all but four central banks.
Money Managers
Hedge funds and other money managers cut bets on higher prices to 111,919 futures and options in the week ended Dec. 27, the lowest since January 2009, U.S. Commodity Futures Trading Commission data show. The drop preceded the rally in prices. The last time the net-long position was that low, prices climbed about 16 percent in the next four weeks.
The U.S. and its allies are tightening restrictions on Iran, accusing it of a covert plan to build nuclear weapons, a charge Iran’s government denies. About one in six barrels of oil traded worldwide flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.
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Gold Rises, Breaks Ranks with Euro Again
Reuters
Gold rose on Thursday, a day after it broke ranks with riskier assets, on track to extend to a fifth straight day of gains in the face of a sharp fall in the euro on renewed European debt fears.
The metal reversed initial losses that were pressured by a report showing growth in the U.S. services sector only picked up slightly in December.
On Wednesday, gold hit a two-week high and appeared to buck a trend of moving in lockstep with the euro and the S&P 500 U.S. stock index. Gold has now recovered from last week's losses that briefly sent it into a bear market.
"I expect we are going to see money from hedge funds and money managers to return to gold as a safe haven by the end of the month," said George Nickas precious metals broker at commodities firm FCStone.
"It's just a matter of time for the gold buyers to return to the market as the European crisis hasn't been resolved," he said.
Spot gold gained 0.2 percent to $1,613.44 an ounce by 12:11 p.m. EST (1711 GMT).
U.S. February gold futures rose $2.30 to $1,615 an ounce.
Trading volume was strong for a third straight day, preliminary Reuters data showed. Analysts said stronger volume signaled renewed buying interest after gold fell sharply in thin holiday volume.
Earlier in the session, gold was under pressure as the euro slipped to its lowest since September 2010 against the U.S dollar as lingering concerns about euro zone debt crisis prompted weakness in the shared currency.
The 25-day correlation-log between spot gold and euro was near a one-year high reached last week, indicating strong positive link between bullion and the common unit.
"It is a risk on/risk off trade for gold. I expect gold to experience a volatile period throughout the first quarter, and this relates to the euro zone crisis," said Peter Fertig, consultant at Quantitative Commodity Research.
Silver edged up 0.1 percent to $29.18 an ounce, while platinum slipped 0.4 percent to $1,410.74 an ounce. Palladium dropped 1.4 percent to $637.22 an ounce.
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