SF: Gold Traders Most Bearish in Three Years After Drop: Commodities
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May 3 (Bloomberg) -- Gold traders are the most bearish in three years after investors sold a record amount of metal held in exchange-traded products and prices tumbled in a bear market.
Twenty analysts surveyed by Bloomberg expect bullion to drop next week, with nine bullish and four neutral, the biggest proportion of bears since February 2010. Investors sold 174 metric tons through ETPs last month, and $17.9 billion of value was wiped out, data compiled by Bloomberg show. Hedge funds accumulated their second-biggest bet against gold on record, according to U.S. Commodity Futures Trading Commission data.
Prices had the biggest two-day drop in more than three decades last month and a majority of the 38 analysts surveyed by Bloomberg said gold’s 12-year winning streak is over. The rout highlights how some investors have lost confidence in the traditional store of value, even as central banks print an unprecedented amount of money and Europe’s debt crisis spreads.
“The fundamental picture, for now, has changed,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “The investment community or those trading paper gold in futures and ETPs are still heading for the exit.”
Gold fell 12 percent to $1,480.31 an ounce this year in London, after climbing as much as sevenfold in the previous 12 years. The metal slid into a bear market on April 12 after dropping more than 20 percent from its record closing high of $1,900.23 in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.6 percent this year and the MSCI All- Country World Index of equities gained 8.4 percent. Treasuries returned 1 percent, a Bank of America Corp. index shows.
Mine Supply
Investors sold another 13.2 tons from ETPs this month, taking combined holdings to 2,262.7 tons valued at about $107.4 billion, according to data compiled by Bloomberg. The total is equal to about nine months of mine supply. Institutions own about 50 percent of holdings in the SPDR Gold Trust, the biggest ETP, and they may sell about half as prices drop and investors favor equities, Deutsche Bank AG said in an April 26 report.
While prices rallied 12 percent since reaching a two-year low April 16, the metal probably will cap its first annual loss since 2000, according to the Bloomberg survey of analysts. Gold will close the year at $1,550, 7.5 percent less than at the end of 2012 and the biggest drop since 1997, the survey showed.
Hedge funds and other large speculators held 69,726 so- called short contracts on the Comex bourse in New York on April 23, the CFTC data show. That’s up from as few as 7,283 contracts at the end of November.
U.K. Mint
The mid-April slump in prices spurred worldwide demand for coins and jewelry. The U.S. Mint ran out of its smallest gold coin last month, the U.K. Mint said demand more than tripled and the Perth mint stayed open through the weekend to meet orders that reached a five-year high. Premiums paid by jewelers in India to get supply surged as much as fivefold in 10 days, the Bombay Bullion Association said.
The price swings are also spurring more demand on exchanges, with record volume in the Shanghai Gold Exchange’s benchmark cash contract on April 22. Trading in Comex futures and options reached an all-time high a week earlier.
Central banks are still adding to gold reserves that are now at an eight-year high, according to International Monetary Fund data. Banks bought 534.6 tons last year, the most since 1964, according to the London-based World Gold Council. They are on pace to exceed that this year, Jason Toussaint, the managing director of investments at the council, said April 30.
