Bulls cut positions as prices rally most in two months

Fiscal Cliff

Stimulus programs may not be enough to combat an economic slowdown because the U.S. faces a so-called fiscal cliff, said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama.

The U.S. risks entering a recession that will hurt economic growth worldwide should Congress allow the more than $600 billion of tax increases and spending cuts to take effect next year, Fitch Ratings said Nov. 8. Standard & Poor’s stripped the U.S. of its AAA credit rating on Aug. 5, 2011, after months of political wrangling over the debt ceiling.

“The issue of a global slowdown and worries about the fiscal cliff will be a drag, and that makes me cautious,” Hellwig said. “The environment is less than attractive, and we have not added to our position in commodities for some time and have a minimal exposure.”

Goldman Outlook

Goldman Sachs Group Inc. is “increasingly cautious” about copper in the short term because of the fiscal cliff. Refined supplies have been in surplus for the past several weeks, Max Layton, one of the bank’s analysts in London, said in a report Nov. 8. Net-long positions in copper fell 70 percent to 2,077 contracts, the lowest since Sept. 4, the CFTC data showed.

Money managers added a net $235 million to commodity funds in the week ended Nov. 7, with gold and precious metals accounting for $501 million, according to Cameron Brandt, the director of research at Cambridge, Massachusetts-based EPFR Global, which tracks money flows.

China’s industrial production rose 9.6 percent in October from a year earlier, the National Bureau of Statistics said Nov. 9, exceeding analyst estimates. The country is the world’s biggest consumer of copper, soybeans and pork. The U.S. is the top user of corn and crude oil.

Gold Wagers

Investors trimmed gold wagers by 13 percent to 130,128 contracts, the lowest since Aug. 21. Prices jumped 3.3 percent last week, and are up 10 percent in 2012, heading for a 12th straight annual gain.

Twenty-five of 33 analysts surveyed by Bloomberg expect gold prices to rise this week, and three were bearish. A further five were neutral, making the proportion of bulls the highest since Aug. 24. Investors boosted assets in gold-backed exchange- traded products to an all-time high of 2,596.1 metric tons on Nov. 8, data compiled by Bloomberg show.

A measure of 11 U.S. farm goods showed speculators trimmed bullish bets in agricultural commodities by 12 percent to 532,601 contracts. Bets on a hog rally tumbled 23 percent to 23,979 contracts, the biggest drop since Aug. 28. Prices jumped 3.9 percent last week, reaching the highest in more than three months on Nov. 9. The U.S. Meat Export Federation said Nov. 6 that the value of shipments may top $11.5 billion this year, exceeding the 2011 record.

“While fundamentals will help the agriculture pack, the continuous money-printing policy that central banks have adopted will support most commodities,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management, who helps oversee more than $1 billion of assets. “The overall long-term trend remains bullish.”

Bloomberg News

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