[LONDON] GOLD traders are the most bearish in more than a year on mounting speculation that improving economic growth from the United States to China will curb demand for this year's worst-performing precious metal.
Twenty analysts surveyed by Bloomberg this week expect prices to fall next week, while 11 were bullish and three were neutral, making the proportion of bears the highest since Dec 30, 2011.
Hedge funds have cut bets on higher prices by 56 per cent since October and are approaching their least bullish stance on gold since August, government data show. The metal fell to a six-week low yesterday, and billionaire investors George Soros and Louis Moore Bacon reported on Thursday that they had reduced stakes in exchange-traded products backed by gold.
First-time jobless claims in the US decreased more than estimated last week, while a Chinese government-backed survey showed manufacturing expanded in January. Growth will accelerate in the world's two largest economies in coming quarters, according to more than 100 economists surveyed by Bloomberg. Investors cut record bullion holdings in exchange-traded products this year and added to funds backed by other precious metals that are used more in industry.
"The global economic recovery is on track," said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia's second-largest lender. "The persistently decent macro data is denying gold its usual safe-haven properties. You can get better returns elsewhere."
Gold prices that rallied the past 12 years will probably peak in 2013, or already have, according to Goldman Sachs Group Inc and Credit Suisse Group AG.
The metal fell 2.5 per cent to US$1,633.40 an ounce in London this year, and reached US$1,630.60 yesterday, the lowest since Jan 4. Gold climbed 7.1 per cent last year in the longest annual rally in at least nine decades. The Standard & Poor's GSCI gauge of 24 commodities is up 5.2 per cent this year and the MSCI All-Country World Index of equities gained 4.8 per cent. Treasuries lost 0.9 per cent, a Bank of America Corp index shows.
Gold's drop compares with a 0.1 per cent gain for silver this year. Platinum and palladium rose at least 8.3 per cent on concern mine supply will fall as demand increases. An ounce of platinum bought as much as 1.054 ounces of gold on Thursday, the most in 17 months. Industrial usage accounts for about 10 per cent of bullion consumption, compared with more than half for the other three metals.
Reduced holdings
Gold ETP assets reached a record 2,632.5 tonnes on Dec 20 as policymakers from the Federal Reserve to the Bank of Japan pledged more action to stimulate growth. Holdings are down 0.9 per cent this year, while silver products rose 3 per cent, platinum 9.9 per cent and palladium 13 per cent.
Soros Fund Management reduced its investment in the SPDR Gold Trust, the biggest fund backed by the metal, by 55 per cent to 600,000 shares as at Dec 31 from three months earlier, a US Securities and Exchange Commission filing showed on Thursday. Bacon's Moore Capital Management LP sold its entire stake in the SPDR fund and lowered holdings in the Sprott Physical Gold Trust. Paulson & Co, the largest investor in SPDR, kept its stake at 21.8 million shares, a filing showed.
2011 peak
Bullion is unlikely to return to its September 2011 high of US$1,921.15 because of accelerating US growth and contained inflation, Credit Suisse said in a Feb 1 report. Goldman forecast in a Jan 18 report that gold will climb to US$1,825 in three months and peak this year.
US economic growth will accelerate every quarter this year to a median 2.7 per cent in the final three months, according to 87 estimates compiled by Bloomberg. China's expansion will pick up to a median 8.3 per cent in the third quarter from 8.1 per cent in the first, according to 34 estimates compiled by Bloomberg.
Even as the recession in Europe deepened more than economists forecast last quarter and Japan's economy shrank, the International Monetary Fund predicts global growth will climb to 3.5 per cent this year from 3.2 per cent in 2012.
"There's a lack of imminent financial disasters at the moment," said John Meyer, an analyst at SP Angel Corporate Finance LLP, a broker and adviser in London. "Investors are going for a more risk-on approach and that tends to lead them away from gold."
Inflation
Gold generally earns returns only through price gains and some investors buy it as a hedge against inflation and currency declines. While consumer-price gains are below the Fed's 2 per cent target, inflation expectations measured by the break-even rate for five-year Treasury Inflation Protected Securities rose 13 per cent this year and reached a four-month high on Feb 6.
Finance ministers from the Group of 20 gather this weekend in Moscow amid concern of a fresh "currency war" as countries weaken their exchange rates to make exports more competitive.
"The monetary backdrop is still extremely positive for gold, so we would be accumulating here," said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland.
Buying also may pick up as China's markets open after this week's Chinese New Year holiday. China accounted for about 25 per cent of consumer gold demand last year and narrowed the gap between top buyer India to the smallest ever, the London-based World Gold Council said on Thursday. The group said consumption from both countries may rise at least 11 per cent in 2013.
Central banks
Central banks from Brazil to Russia are buying more gold to diversify from currency holdings. They added 534.6 tons to reserves last year, 17 per cent more than in 2011 and the most since 1964, the council said yesterday. Those purchases helped stem the first annual drop in total demand in three years, as investment slid 9.8 per cent and jewellery demand fell 3.2 per cent.
Money managers held a net-long position of 86,926 futures and options in the week to Feb 5, US Commodity Futures Trading Commission (CFTC) data show. That was 5.9 per cent more than the previous week, when wagers on gains were the lowest since Aug 14.
Gold's 8.8 per cent slump since Oct 4 took prices below the 200-day moving average, indicating to some who study technical charts that more declines may follow. Prices are down 1.8 per cent in February, and a fifth straight monthly drop would be the worst run since 1997. Gold fell in March in six of the last nine years, according to data compiled by Bloomberg.
Copper, sugar
In other commodities, 10 of 17 traders and analysts surveyed expect copper to rise next week, five were bearish and two were neutral. The metal for delivery in three months, the London Metal Exchange's benchmark contract, rose 4 per cent to US$8,249.75 a tonne this year.
Eight of 16 people surveyed expect raw sugar to gain next week and seven predict a drop. The commodity slid 8.9 per cent to 17.77 cents a pound on ICE Futures US in New York this year.
Sixteen of 26 of those surveyed anticipate a rise in corn prices next week and seven said the grain will drop, while 17 said soya beans will advance and six expect lower prices. Sixteen of 26 traders predicted higher wheat and six were bearish. Corn fell 0.7 per cent to US$6.935 a bushel this year in Chicago as soya beans lost 0.2 per cent to US$14.0675 a bushel. Wheat is down 4.6 per cent at US$7.4225 a bushel.
The S&P GSCI gauge of raw materials climbed to the highest since September two days ago and is little changed this week. Speculators increased bullish bets across 18 US commodities for a fourth week in the period to Feb 5, CFTC data show.
While improving growth may curb demand for gold as a protection of wealth, other commodities used in industry and food products may benefit. Usage will outpace supply this year in tin, platinum and palladium, while corn, wheat and cocoa will have shortages in the 2012-13 season, according to estimates from Barclays plc and Rabobank International.
"The economic activity in China and US are telling us that commodities are poised to rise," said Robert Keck, president of Princeton-based 6800 Capital LLC, which manages about US$650 million. "While Europe maybe slow, overall the global economy is growing." - Bloomberg
