Gold Traders Most Bullish in 5 Weeks After Fed: Commodities

"If you don't believe gold could be worth more than $2000 per ounce in a few month then you will regret it."



Gold traders are the most bullish in five weeks after Federal Reserve Chairman Ben S. Bernanke said the U.S. still needs stimulus.

Nineteen analysts surveyed by Bloomberg expect prices to rise next week, nine were bearish and three neutral. Gold fell 23 percent last quarter, with the decline accelerating after the Fed chairman said June 19 that bond buying could slow if the economy improves. Unprecedented money printing by central banks since the global recession boosted bullion buying as a hedge against inflation.

Gold is heading for the first annual drop in 13 years after some investors lost faith in it as a store of value. The retreat in prices to a 34-month low on June 28 spurred demand for jewelry and gold coins, diminishing supply and driving the cost of borrowing the metal to a 4 1/2-year high, according to data compiled by Bloomberg.

“With the Fed comments, with the increased cost of funding a short position and some recalibration in peoples’ thinking about the end of quantitative easing, the onus is really on the bears now,” said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. “Physical demand is supporting the market very nicely.”

Physical Demand

Jewelry and coin demand around the world surged after gold dropped into a bear market in April. The U.S. Mint sold 21,000 ounces of American Eagle coins so far this month, on course to beat the 57,000-ounce June total, data on its website show.

Demand is weakening elsewhere, with Australia’s Perth Mint saying its coin and bar sales dropped for a second month in June, falling 47 percent. Physical consumption isn’t as strong as in April, partly because India, the biggest buyer, imposed curbs on imports last month to trim its trade deficit, Standard Chartered said. Indian imports probably slid 80 percent in June and will be “weak” in July and August, the bank estimates.

Investors sold 645.45 metric tons from gold-backed exchange-traded products this year, erasing $60 billion from the value of the funds, data compiled by Bloomberg show. Holdings reached 1,983.6 tons this week, the lowest since May 2010. Billionaire John Paulson’s PFR Gold Fund tumbled 23 percent in June, extending this year’s loss to 65 percent. He owns the largest stake in the SPDR Gold Trust, the biggest bullion ETP.

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