Gold traders are the least bullish since July

Gold’s biggest rout in three months means traders are the least bullish since July and Dennis Gartman, the economist who sold the last of his metal on the day the slump began, warned of further declines.

Ten of 21 surveyed by Bloomberg expect the metal to gain next week, the lowest proportion since July 29. Three were neutral. While bullion’s slide of as much as 9 percent this week took its drop from the record $1,923.70 an ounce reached in September to almost 20 percent, the common definition of a bear market, investors are still holding the most metal ever in exchange-traded products, a wager now valued at $119.2 billion.

Commodities retreated the most in almost three months and more than $640 billion was wiped off the value of global equities on Dec. 14 after the Federal Reserve refrained from taking new stimulus measures. That combined with signs of increased funding stress inEurope helped drive the dollar to the highest since January against the euro. Gold typically moves in the opposite direction to the U.S. currency.

“Bears are in the driver seat,” said Miguel Perez- Santalla, vice president of sales at Heraeus Precious Metals Management LLC in New York, whose clients include jewelers and mining companies. (BWMING) “But the problems in Europe have not been solved and buying will come back and we will see higher prices because of a lack of confidence in the financial system.”

Bank of America

Bullion rose 10 percent to $1,570 an ounce this year on the Comex in New York. Even after this week’s rout, it’s still the fifth-best performer in the Standard & Poor’s GSCI gauge of 24 commodities, which fell 2 percent. The MSCI All-Country World Index of equities retreated 12 percent this year and Treasuries returned 9.7 percent, a Bank of America Corp. index shows.

Options traders are still bullish. The most widely held option gives owners the right to buy gold at $2,000 by March, data from the bourse show. The eight biggest holdings are all call options at 15 percent or more above prices today.

Investors added about 4.1 metric tons of gold to their ETP holdings this week, even as prices slumped, data compiled by Bloomberg show. They now have a combined 2,360.8 tons, greater than the reserves of all but four of the world’s central banks and equal to more than 10 months of global mine supply.

Demand for physical gold accelerated this quarter at the fastest pace in more than a year as Europe’s debt crisis deepened. The European Central Bank cut interest rates for a second consecutive month last week to shore up growth. Lower interest rates increases the appeal of gold because it generally earns investors returns only through price gains.

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Posted by admin on Dec 16 2011. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry