Gold traders split with bullion nearing bear market

Twelve analysts surveyed by Bloomberg expect prices to rise next week and the same number were bearish. A further three were neutral. Gold slumped to a 10-month low of $1,540.29 an ounce on Thursday and investors sold $9.8 billion from exchange-traded products (ETPs) since their holdings reached a record on 20 December. Hedge funds cut bets on higher prices by 70% since October.
Gold’s 12-year bull rally is probably ending as the US leads a global economic recovery, according to banks from Credit Suisse Group AG to Goldman Sachs Group Inc. Commerzbank AG says it’s too early to call an end to the rally and Standard Bank Plc forecasts prices will climb this year as central bank stimulus and record-low interest rates spur demand for a protection of wealth. The Bank of Japan (BoJ) said on Thursday that it will double monthly bond buying to bolster the economy.
“The main driver behind gold’s weakness this year has been the focus on global growth and that’s meant rotation out of defensive asset.
“The main driver behind gold’s weakness this year has been the focus on global growth and that’s meant rotation out of defensive assets like gold,” said Joni Teves, an analyst at UBS AG in London. “There’s this weak sentiment and it’s been feeding on itself. Central banks continue to pursue exceptionally loose monetary policies and create a still supportive environment for gold.”
Gold price
The metal fell 7.3% to $1,552.30 in London this year. A close at $1,520.18 would be a 20% drop from the peak reached in September 2011, the common definition of a bear market. The Standard and Poor’s (S&P) GSCI gauge of 24 commodities dropped 2% this year, and the MSCI All-Country World Index of equities gained 5.1%. Treasuries gained 0.3%, a Bank of America Corp. index shows.
Hedge funds
Hedge funds held a net-long position, or wager on price gains, of 60,126 futures and options by 26 March, US Commodity Futures Trading data shows. The 39,631 contracts held three weeks earlier were the least since July 2007. The $8.5 billion taken out of commodity ETPs in the first quarter was led by investors selling $9.2 billion from gold products, BlackRock Inc. said on Thursday. Gold holdings slid 7.4% this year to 2,437.4 metric tons, data compiled by Bloomberg shows.
Billionaire investor George Soros, who called bullion the ultimate asset bubble in 2010, cut his stake in the SPDR Gold Trust by 55% in the fourth quarter, filings showed in February. John Paulson, the largest investor in the biggest bullion ETP, kept his holding now valued at about $3.3 billion unchanged, his filing showed.
Gold will climb to an average of $1,800 in the fourth quarter on demand for an alternative currency and protection from Europe’s debt crisis, Commerzbank said in a 21 March report. Low real interest rates and global liquidity will remain dominant drivers, Standard Bank said in a report last month, forecasting prices as high as $1,780 in the third quarter..

 NAME - AMIT KUMAR SINGH
PGDM - 2ND SEM