Gold bears braced for U.S. to China growth recovery

Central Banks

Central banks from Brazil to Russia are buying more gold to diversify from currency holdings. They added 534.6 tons to reserves last year, 17% more than in 2011 and the most since 1964, the council said yesterday. Those purchases helped stem the first annual drop in total demand in three years, as investment slid 9.8% and jewelry demand fell 3.2%.

Money managers held a net-long position of 86,926 futures and options in the week to Feb. 5, U.S. Commodity Futures Trading Commission data show. That was 5.9% more than the previous week, when wagers on gains were the lowest since Aug. 14.

Gold’s 9.7% slump since Oct. 4 took prices below the 200-day moving average, indicating to some who study technical charts that more declines may follow. Prices are down 2.8% in February, and a fifth straight monthly drop would be the worst run since 1997. Gold fell in March in six of the last nine years, according to data compiled by Bloomberg.

Copper, Sugar

In other commodities, 10 of 17 traders and analysts surveyed expect copper to rise next week, five were bearish and two were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 4.1% to $8,254 a ton this year.

Eight of 16 people surveyed expect raw sugar to gain next week and seven predict a drop. The commodity slid 8.2% to 17.91 cents a pound on ICE Futures U.S. in New York this year.

Sixteen of 26 of those surveyed anticipate a rise in corn prices next week and seven said the grain will drop, while 17 said soybeans will advance and six expect lower prices. Sixteen of 26 traders predicted higher wheat and six were bearish. Corn added 0.4% to $7.0075 a bushel this year in Chicago as soybeans rose 0.5% to $14.17 a bushel. Wheat is down 3.7% at $7.4925 a bushel.

The S&P GSCI gauge of raw materials climbed to the highest since September two days ago and is up 0.2% this week. Speculators increased bullish bets across 18 U.S. commodities for a fourth week in the period to Feb. 5, CFTC data show.

While improving growth may curb demand for gold as a protection of wealth, other commodities used in industry and food products may benefit. Usage will outpace supply this year in tin, platinum and palladium, while corn, wheat and cocoa will have shortages in the 2012-13 season, according to estimates from Barclays Plc and Rabobank International.

“The economic activity in China and U.S. are telling us that commodities are poised to rise,” said Robert Keck, president of Princeton-based 6800 Capital LLC, which manages about $650 million. “While Europe maybe slow, overall the global economy is growing.”

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